IFLR 1000
The Guide to the World's Leading Financial Law Firms

Capital markets in Russia have shown signs of picking up this year, especially on the debt side, with partners feeling comfortable enough to predict a healthy market state after something of a difficult 2010.

"The markets have shown signs of life, unlike most of 2010," comments one partner, while another says that the previous year had flattered to deceive: "2010 had great promise at the beginning, but then deals began getting pulled and postponed."

Partners seem fairly upbeat about the most recent quarters though, as one says: "It's been busy actually, over the last seven or eight months it has anyway."

"The markets have been pretty busy, we have seen it coming back after the crisis," adds another.

Unfortunately, it would appear that, on the equity side, things aren't quite hitting the heights people would like: "The equity market is pretty repetitive of last year. Things began excitedly and enthusiastically, but then deals started getting pulled," says on partner and another agrees: "In equity there has been a lot of work on deals but the market itself hasn't lived up to expectations. There was a delayed demand, and pricing was a problem," explains another practitioner.

The debt markets aren't letting the side down though and have been increasingly robust: "Debt has been actually very active. There have been a number of new issuers doing work, high quality issuers too. There is a growing universe here and not just corporates and banks."

"Eurobonds will stay strong for high quality issuers, but not if you're not blue chip," comments another debt practitioner.

Something that has gone unnoticed is regulation, which hit the books in 2009, allowing the listing of foreign securities in Russia. According to one partner though, "none have been done yet except for the European Bank for Reconstruction and Development (EBRD), who got a special dispensation to do so."

It is something that could be positive for the market though: "This could develop, it's a possibility. Economically it makes sense as there is a lot of liquidity here," says a partner.

Continuing the trend from last year, securitisation is still very much absent, with only the merest flickers of interest apparent: "Securitisations are still passive, but people are talking. Last year they were a non-starter," states a partner, optimistically.

The big story in the markets from Russia however is the merger between Micex (Moscow Interbank Currency Exchange) and RTS (Russian Trading Systems) which, despite being put off from its original completion date, will go through before the end of the year.

"It's definitely a good thing for the financial market. It will simplify the approach for brokers," says a partner, while another reflects the wider, strategic goal of the Russian government behind the merger: "The name of the game is consolidation. It's all about making Moscow develop into a stronger financial centre."

"The broad theme is that they want to make Moscow a world financial centre and are looking to do so through infrastructure and improving accessibility," concurs another partner.

How the eventual new market will be run is a concern however: "The markets merger is, if you read between the lines, government-imposed. The derivatives one is run by younger, more entrepreneurial people, while the equity one is a little more traditional. The outcome all depends on who is got in to run it afterwards, from one of these two areas," explains an equity partner.

Finally, lawyers are finding themselves having to work to a constricted timetable, as they perceive a sort of window for deals this year which will begin to inch towards closing as the run-up to the elections begins.

"There are elections for the Duma in December, and for the presidency in March. We don't expect a change of the person at the top or a massive regime change but there might be certain changes, different approaches," says one partner, while another explains the direct effect this can have: "Russians are unsettled at the moment, and these elections will be something of a drag on economic activity. Deals will need to be done by the fall or you'll then see them being left until after the elections."

Allen & Overy has had something of a tumultuous year overall and have also had to absorb two big losses from its markets team in Moscow. Its head of equity capital markets Varun Gupta jumped ship to Akin Gump's office in the Russian capital and the head of the debt capital markets and securitisation practice Konstantin Kroll, described by a client in the IFLR1000 last year as 'the best securitisation lawyer in Russia', moved to Jones Day.

"The departures at A&O will make them weaker, no doubt," comments one competitor. Though the firm does hold its positions this year, it will be very interesting to see how it deals with these departures long term, as it is too soon to really see the full effects.

As it happens, Gupta was active on one of the firm's highlight deals this year, advising Mechel on the first Securities and Exchange Commission-registered offering by a Russian company since before the crisis, in 2006. This entailed an offering by shareholders of preferred American Depository Shares (ADS), which was valued at $251 million and then listing the preferred ADS on the NYSE.

Partner James Roe, a big figure in the team there, also advised Troika Dialog and NCB Stockbrokers on an IPO for Avangardco Investment Public. This deal was worth $256 million and was listed on the LSE. Due to troublesome market conditions, the firm is also sitting on a number of postponed IPOs, some for very big name clients, which they will hope to push through before the elections.

The debt side was extremely active for Allen & Overy, including the now-departed Konstantin Kroll advising RusHydro, the world's second-largest hydroelectric power generator, on its debut Eurobond issue. The deal is also notable for the fact that it is the first rouble-denominated Eurobond issue by a Russian corporation.

Eurobonds also made up a good portion of the team's work, as James Roe advised JPMorgan and Troika Dialog in their role as joint lead managers on the five year Eurobond offering for leading Ukraine agricultural industry company Avangard. This offering yielded a value of around $200 million.

In what was a quiet year for derivatives, the team there did manage to eke out a few mandates, including advising a major international bank on a structured equity derivative transaction with regard to American Depository Receipts and local shares in a large Russian production company. This deal, which was led by Konstantin Kroll, employed synthetic equity collateral too.

Baker & McKenzie entered the rankings last year on the back of a strong run on the equity side, but the firm's debt work has also been solid this year.

The team is headed up by leading lawyer Vladimir Dragunov although it did suffer something of a blow with the loss of partner Mikhail Turetsky. One peer comments: "Baker & McKenzie have lost a partner to Latham & Watkins, so in the future they might struggle." Turetsky is also described as "very solid, young, but good" by another partner.

A good representative deal for the team involved Turetsky, as he advised the borrower, Investbank, with regard to a private offering of Loan Participation Notes by Amber Finance. The notes were intended to finance a tier 2 subordinated loan to the firm's client, and was Investbank's debut subordinated debt issue. The deal closed in December 2010 for $150 million.

Another good deal featured both Dragunov and Turetsky, as they acted as counsel for MDM Bank on an issue of 9% loan participation notes, due May 2013, by Moscow River, which in turn was to finance a secured loan to Renaissance Group Holdings. The loan itself was arranged by MDM Bank, and the whole transaction closed out in June 2010 for $150 million.

US firm Cleary Gottlieb Steen & Hamilton possesses a market-leading capital markets practice in Moscow, in line with its perceived specialism in this area worldwide. Traditionally a touch stronger in equity than debt, the firm has closed the gap considerably this year with a number of large deals in that area.

On one highlight deal, for the firm as well as the market, a team led by David Sabel and David Gottlieb advised the Russian government with regard to its Eurobond issue. This announced the federation's initial return to the market in April 2010, when it placed Eurobonds worth around $5.5 billion, and also included the R40 billion (€1 billion) offering with a 7.85% coupon due 2018. The deal is unique for two reasons, as it is the first Rouble Eurobond issued by the Russian Federation and also because it represents one of the most sizeable local currency Eurobond offering. It closed in March 2011 for an overall value of $43 billion.

The team found itself working on a few of these Eurobond issues this year, including one for Sovcomflot that completed in October 2010. Sovcomflot is the largest shipping company in Russia and is state-owned, to the extent of being listed on the government's strategic enterprises list. The 5.735% notes worth $800 million were issued by SCF Capital, with London-based Simon Ovenden assisting leading lawyer Murat Akuyev in Moscow.

The firm was also pioneering in other areas, acting on the first issuance of Renminbi bonds, that is, securities denominated in the Chinese currency, carried out by a Russian borrower outside China. On this the same team that acted on the Sovcomflot deal advised JSC VTB Bank, and this transaction closed in December 2010 for a value of €108 million.

Cleary also managed to get hold of one of the very few big IPOs this year, acting for Mail.ru Group, a Russian firm that operates social networks and which owns 2.4% of Facebook as well as stakes in Groupon and vKontakte, the latter being a Russian social networking site. Murat Akuyev was involved here too alongside fellow leading lawyer Daniel Braverman, advising on the IPO and LSE listing for the company, a deal valued at $1 billion that closed in November 2010.

Although the team operates on an international basis, going between Moscow and London and making use of the firm's network, it retains an experienced and dedicated team in Moscow. This team was further augmented by the promotion of Yulia Solomakhina to partner, after working for Cleary since 2002. Ms Solomakhina took up her new position as of January 2011.

Clifford Chance is a solid tier two firm whose expertise on the debt side specifically has worked well for them with the market being skewed in that direction this year.

"CC have capable lawyers yes, but do still suffer a bit from the management shakeup that went on," comments one partner, though the overall market consensus seems to be that CC is still a tier two firm that, on the debt side, is aiming for the top tier.

Clients are also pleased with the services they have received: "They were proficient, and applied themselves well. They were very switched on, and it all worked smoothly," says one, while another praises the level of senior engagement on deals: "The level of partner involvement was very good."

A big deal for the team was its advising of Barclays Capital, Citi and Deutsche Bank in their capacity as joint lead managers of an offering of 2.625% senior unsecured convertible bonds by Lukoil International Finance. Due in 2015 Lukoil, a subsidiary concern of OAO Lukoil, saw a value of $1.5 billion represented in this deal, which closed in the final months of 2010 having been overseen by lead partner Tamer Amara in Moscow.

In a similar deal, in client, role and scope, a team again led by Tamer Amara advised joint lead managers Barclays Capital, ING and RBS on the offering of $1 billion of notes with a 6.125% coupon by Lukoil International Finance. The notes are due 2020 and the deal closed out in September 2010.

On the equity side, Arthur Iliev teamed up with the firm's counterpart office in London to advise Deutsche Bank, JPMorgan Securities, Troika Dialog and TD Investments as underwriters with respect to a $388 million US Reg S offering of shares in Mostotrest, a large transport infrastructure construction group.

Iliev himself is an experienced and well regarded partner in the market, as one competitor says: "Iliev's is a name that springs to mind when you think of the more refined, mature lawyers in this area."

Freshfields is a firm that is renowned worldwide for its strong corporate capabilities; as one partner puts it: "They are very corporate and a great firm, we see them a lot there."

However, the firm also boasts a significant markets practice in Moscow that is highly praised by both partners and clients for its growth and ambition.

"We would be looking to appoint them in more cases now due to their staff and the quality of staff they have recruited," comments one client, while another singles out Peter Allen, the London-based partner who does regular work with Moscow, for high praise: "Peter Allen would be up there in the pantheon of great lawyers, if you like. He is very hands-on and just very, very good."

On the ground in Moscow, the equity and debt practices are headed up by Mikhail Loktionov, another who draws appreciation from those in the market, especially for his pragmatic, no-nonsense approach. "When you've been doing this a long time you get to dislike those who state the obvious, or show off. Mikhail is one of those people who can say 'Look, we're all intelligent people around this table, let's not state the obvious and get stuff done.' I like that," says a competitor.

The firm's equity team was quite active, but unfortunately most of their deals fell prey to the volatility of the market. One notable mandate, which is now postponed was their advising of Nord Gold, the gold mining division of Serverstal, on the IPO and prized premium listing on the LSE. Despite a lot of work having been completed on the deal and it being announced at the start of January 2011, the offering, evaluated to be worth around $1 billion, was postponed, with the hope it can be completed when the market settles.

Like most of the firms in this area, it was the debt markets that kept Freshfields lawyers occupied, with the team active on a handful of plus $1 billion deals.

The largest and most high-profile of these saw a team, led by Mikhail Loktionov, advising Sberbank on its Loan Participation Notes Programme. One aspect entailed an LPN update worth $10 billion, as well as a $1bn issue of Series 4 Notes, while another involved another $1 billion issue of Series 5 Notes. This deal completed in the summer of 2010 for an overall stated value of $10 billion.

The firm also advised Russian Railways during the course of 2010 with regard to the placement of Eurobonds on the Irish Stock Exchange and counselled Severstal on the setting up of its own LPN Programme to be done on the LSE. This work closed in October 2010 for an approximate value of $3 billion.

The firm also moved to shore up its equity practice this year by taking on two partners from its London office, Sebastian Lawson and Neil Radford, who took their places in Moscow during spring 2011.

Hogan Lovells has a solid capital markets team in Russia led jointly by Michael Pugh and Oxana Balayan. Both partners are very hands-on as regards work and despite being active on the equity side the good deals come in debt, reflecting the market trends.

Eurobonds took up a proportion of the team's time; they included advising the Bank of Moscow on its Singapore-listed Eurobond, only the second deal of this kind for a Russian bank. This closed in February 2011 for $119 million. A team led by the highly-respected Pugh is also advising, on a continuing basis, Locko-Bank on its Eurobond issue.

There were still some remnants of past financial crises however as the firm also advised gaming company Ritzio International Limited on the restructuring of bonds it had defaulted on. The restructuring concluded in August 2010 for $280 million.

"Latham have been through a difficult phase of losing partners. It had a changing of the guard in the crisis too," says one partner, giving some background to the big news within the firm's Moscow office over the past 12 months.

This was the departure of managing partner Mark Banovich, who decided to take a step back from the law and return to his family in the US. This was all done on good terms, and the experienced Chris Allen took over the managing partner role.

The firm then moved to bring on board Mikhail Turetsky from Baker & McKenzie, a lawyer described as "...very solid, young, but very good" by a rival partner, to help replace the capital markets capability previously provided by Banovich. Senior associate David Stewart, another highly-regarded practitioner, also stepped up to help co-head the capital markets practice.

The firm was actually a leader coming in to 2011, closing the first successful IPO of the year advising HMS Hydraulic Machines and Systems Group on an offering of 14 and a half million Global Depository Receipts (GDRs) each representing an interest of one ordinary share, a subsidiary offering of 23 million GDRs in HMS Technologies and a further offering of six million GDRs by Skye Commercial too. Representing a total value approaching $360 million, the transaction completed successfully in the first quarter of 2011.

The firm had made a strategic point of improving its debt work and it has been acting on some good deals in this area too. A solid mandate for the firm was its advising of MTS International Fundings as issuer on the issuance of Loan Participation Notes, which were in dollars, showing an 8.625% annual interest rate and maturing in 2020. The deal closed in 2010 for an overall value of $750 million.

Linklaters is a seriously respected firm in capital markets, with both clients and competitors in the market effusive about its capabilities. Market opinion seems to dictate that the title of best capital markets firm is solely between Linklaters and Cleary, in terms of quality and output.

"Links are strong here; they have a stranglehold on this market. They turn out a good product with great efficiency," concedes one rival partner, while another adds: "Linklaters do work with major banks and their international global clients. They also act on most things on the side of the underwriter, and they do an extremely good job of this."

Dmitry Dobtakin is active in the practice on the ground in Moscow alongside debt specialist Andrew Burge, who was singled out by one client for particular praise: "For me, Andrew is a fantastic example of an English lawyer going over there and giving comparable expertise which you would get from London partners."

The overall strength in depth is also something clients point to: "They have a very strong team there. For example, in other firms you will get a varying quality of senior associates, but Linklaters have an outstanding team overall."

Mr Dobatkin took the lead on a big debt deal for the firm, advising the joint Lead Managers and joint Bookrunners Barclays, Citigroup Global Markets, Credit Suisse Securities (Europe) and VTB Capital on a dual issue of bonds by the Russian government's Ministry of Finance. This came in two tranches, the first holding a coupon of 3.625% and due 2015, worth $2 billion, and the second holding figures of 5% interest, a maturity date of 2020 and a value of $3.5 billion.

Another good deal on the debt side made use of the firm's offices in London and Hong Kong as well as Moscow. Andrew Burge led on this, advising HSBC and VTB Capital with regard to the issue of 2.95% Loan Participation Notes, due 2013, to the offshore Remnimbi market in Hong Kong. It is the first time a Russian issuer has done an issue there and it represents a value of Rmb1 billion, or €108 million.

Another thing that keeps Linklaters in the top tier is their list of clients, which is studded with prestigious names including ABN AMRO/RBS, Bank of America Merrill Lynch, BNP Paribas, Goldman Sachs, JPMorgan, Morgan Stanley, and UBS.

Nektorov Saleviev & Partners has been growing this year, a process which entailed hiring senior associate Alexander Nektorov from fellow Russian firm Liniya Prava and making him up to partner in June 2010.

The firm has had some tidy advisory mandates but the main deal had Nektorov leading a team to advis Rusnano, as it transformed from the Russian Corporation of Nanotechnologies into the open joint stock company named Rusnano. These shares were then newly registered, with the transaction closing in May 2011 for around $206 million, by par value of the shares.

Skadden has had a fairly solid year overall, but on the debt side the market reports that the team has fallen off the radar somewhat, a large factor in its move to tier three this year. "Skadden has not done hardly any debt work over the past 12 months," comments one partner and another adds: "I don't see Skadden all that much on the debt side anymore." "Skadden is not strong on debt, we haven't seen them," concurs another practitioner in the market.

Despite this, client feedback remains uniformly positive: "The team there is quite good, in a lot of ways," says one while a fellow client speaks to the relationship they had with the team in Moscow: "We have been working with them for several years so we really do work as a team."

On the equity side the team was involved in a clutch of IPOs, a relatively rare occurrence in the market. On one a team featuring leading lawyers Dmitri Kovalenko and Pranav Trivedi advised the O'Key Group, a food retailer, on its $420 million IPO of global depository receipts which had been listed on the LSE.

Another similar, though slightly smaller deal once more involved Kovalenko, as he advised Ros Agro, a food and agriculture concern, on the $330 million IPO of global depository receipts, that again had been formerly listed on the LSE.

Although not quite as visible as previous years the debt team was active and did act on one significant, standout mandate. Leading lawyer Alexey Kiyaskko was joined by Trivedi in advising Barclays, BNP Paribas, Citigroup Global Markets and RBS in their capacity as lead managers in a dual tranche offering of loan participation notes by Russian company Vimpel Communications. The first was a $500 million offering of 6.493 % notes due 2016 with a secondary offering of 7.748% notes due 2021. This transaction completed fully in February 2011 for an overall value of $1.5 billion.

Continuing a trend from previous years, White & Case's predominant focus in Moscow appears to be on the debt side, with the sizeable deals coming on that side of their markets practice. "White & Case do a lot of debt work, yes," agrees a partner.

In terms of deals, they have been acting for a number of big name clients. On one deal, a team led by Carter Brod advised the Republic of Belarus on the legal aspects of its debut Eurobond offering. The deal is notable for many reasons, including the fact it is the first international sovereign bond issue by Belarus and also the first time a Belarusian issuer has offered international securities. The deal completed in August 2010 for a figure of $1 billion, with the offerings coming in two tranches of $600 million and $400 million.

Another good deal came in the energy sector saw a team, led by returning partner Sven Krogius, advising OAO Novatek, the largest independent natural gas producer in Russia, on a set of sizeable Loan Participation Note offerings. The deal came in two parts, the first being an offering of 5.326% five year notes worth $600 million and the second being ten year notes worth $650 million. Done through an Irish SPV (special purpose vehicle), the notes are traded on the Irish Stock Exchange. Work on the deal completed in February 2011 for an overall stated value of around $1.3 billion.

As mentioned above, a plus point for the firm this year was the return of Sven Krogius, a partner who has also worked in the Stockholm and London offices of White & Case.

"Sven Krogius is going back out to the Moscow office of White & Case and he's very good. It shows their capability," comments one partner.