Our expertise in debt funds and direct lending expertise in debt... · Our expertise in debt funds...
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www.allenovery.com 2016 Our expertise in debt funds and direct lending
Transcript of Our expertise in debt funds and direct lending expertise in debt... · Our expertise in debt funds...
www.allenovery.com
2016
Our expertise in debt funds and direct lending
Allen & Overy was named ‘Most innovative law firm in Europe’ for a record fourth time by Financial Times Report.
Of the 50 firms that appear in the rankings, Allen & Overy is the only one to have topped the list four times in total and to have appeared in the top three every year since it began.
Allen & Overy also had the largest number of commended entries across all firms.Financial Times Innovative Lawyers Report 2007, 2011, 2012 and 2014
Allen & Overy named ‘Most innovative law firm in Europe’ for a record fourth time
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© Allen & Overy LLP 2016
Our expertise in debt funds and direct lending | 2016
“Allen & Overy’s ‘very broad’ finance practice is considered ‘particularly strong’ among the top tier firms.”
IFLR 1000 2013
Why Allen & Overy?European companies have increasingly turned to alternative finance in the past two years, with alternative lenders entering the scene and new products evolving. Clients seek out Allen & Overy for comprehensive and cross-border regulatory advice and complex and innovative finance structures and products in today’s marketplace. Offering thought leadership and developing ground-breaking solutions for our clients are our lawyers’ core strengths, built on long-standing and proven expertise.
Experience acting for non-bank lenders and new market entrants – We regularly act for non-bank lenders, engaging in and expanding their lending platforms, as well as for sponsors or corporates on the receiving end of direct lending. We have advised non-bank lenders on the initial structuring and establishment of funds which act (through subsidiaries) as lenders in Europe on a primary and secondary basis whereby the fund’s main activity is to grant, acquire and hold (directly or indirectly) secured loans (whether senior or mezzanine) in Europe, acting as primary lender – often with no fronting bank. At the same time, advising both lenders and borrowers on the respective loan transaction remains part of our core business ever since.
Funds expertise – We have been involved in over 400 fund-related transactions in recent years and offer expertise across the full life span of any type of fund. In particular, our regulatory team in Luxembourg has frequently advised on setting up debt fund structures qualifying as specialised or alternative investment fund under Luxembourg law. This includes true sale and synthetic loan or debt fund structures as well as one of the first note listings of a Luxembourg investment fund on the London stock exchange.
Whole spectrum of potential vehicles – We have also extensive experience for structures using Luxembourg securitisation vehicles. These can be unregulated companies benefitting from a specific legal regime (allowing for instance compartmentalisation) and, as far as Luxembourg is concerned, a safe harbour from bank licencing requirements.
Regulatory approach – We are familiar with the diverse regulatory environment for the provision of lending business in the EU and establish our structures to take account of local law peculiarities. We have extensive knowledge in the repackaging of assets, including loans, through funds and other vehicles, with and without a fronting bank. Our structures are aimed at optimising structures for all concerned investor groups, including funds and insurance companies.
Market-leading finance practices – The past few years have been the most challenging in the history of the international financial markets and have required fresh thinking. Renowned for our intellectual rigour and our preeminent leveraged finance practice in Europe, our banking and finance lawyers draw on deep product expertise and regularly work alongside our regulatory, real estate, restructuring and other specialists to develop innovative solutions for our clients, often incorporating complex financing techniques that lead the industry.
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Alternative financingOur recent survey “Funding European Business: What’s the alternative?*” (November 2014) revealed that over 200 heads of finance at western European companies were of the view that while bank lending remains the single biggest source of funding on average, alternative
finance is now almost on a par with the traditional lending source and nearly half (47%) of the respondents expect their use of alternative funding to increase over the next five years.
In the midst of a changing financial environment, direct lending by non-bank lenders has established itself as one of the main alternative financing strategies, with this development still continuing. Direct lenders have to establish a convincing platform to provide attractive investment opportunities to their investors throughout the lifetime of the respective funds. Drawing from our in-depth legal experience across disciplines and borders and taking advantage of our geographical spread, Allen & Overy is best placed to assist the direct lending teams with this challenging task – including in particular:
– a convincing platform to address tax issues and regulatory concerns
– relationship to banking services satisfactory to operative needs (RCF, guarantee facility, hedging)
– transparency and predictability of transaction costs relative to size and scope of funding
– translation of commercial rationale into legal documentation based on our deep practical expertise
* Please approach your contact at Allen & Overy, if you are interested in our survey. Additionally, you can download it in the publications area on our homepage www.allenovery.com
Our expertise in debt funds and direct lending | 20164
© Allen & Overy LLP 2016
Shift from bank lending to alternative funding
Increase Stay the same Decrease
0% 25% 50% 75% 100%
Bank lending
Capital markets
Alternative finance
28%
24%
47%
42%
62%
40%
31%
14%
13%
Question asked: Do you expect your use of bank lending, capital markets and alternative funding to increase, decrease or stay the same over the next five years?
Direct lending is mainly driven by the expectations and the requirements of fixed income investors in search of investment opportunities with an attractive return/risk profile.
Direct lending
The above key characteristics influence the establishment of the legal documentation in the field of direct lending, with slightly differing terms between private debt to sponsors and direct lending to corporates. We actively participate in and, at the same time, witness the development and creative use of new trends in combination with “tried and tested” financial products. These include:
– Unitranche Loans
– Senior Secured Amortising Loans
– Term Loan B
– Second Lien
– Mezzanine
– PIK Loans
– Senior Notes, Floating Notes, Unsecured Notes, PIK Notes
– Bridge Loans
– Private Placements
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Direct lending
Higher leverage than traditional senior lending
Mid to long-term investment mentality due
to fixed income/IRR focus
Typically secured structures
Flexible and efficient execution
Lower default rate (and higher recovery rate)
Target small to medium-sized sponsors and
corporates across all industry sectors
Our legal services
Regulatory – Licensing requirements (in particular lending
business, factoring)
– Application of securitisation regime
– Qualification as financial institution/deduction from own funds/unknown client qualification
– Eligibility for concerned groups of investors
– Data protection/bank secrecy
– Shadow banking rules
Tax – Tax structuring advice to avoid tax leakage
– Tax transparent fund solutions
– Withholding tax requirements
– Utilisation of treaty benefits (double taxation conventions)
– VAT advice (eg taxation of credit management services)
– In Germany: advance ruling practice
Structuring – Choose appropriate vehicle: structure should
neither attract application of fund rules (AIF) nor securitisation regime under Capital requirements regulation (CRR)
– Structure should not attract licensing requirements: consider advantages and disadvantages of a fronting bank as well as alternatives to fronting bank
– Optimisation for investors if fund is domiciled in Germany (in particular also for insurance companies investing through funds):
(i) Optimisation for Solvency II and the capital investment ordinance (Anlageverordnung)
(ii) Optimisation for CRR (eg avoid deduction from own funds and application of connected clients regime)
– Consider advantages and disadvantages of look-through approach/establish appropriate reporting
– Best and efficient execution as our guiding principle
– Deal-oriented drafting based on profound understanding of underlying concepts and products and highest technical standards
– Versatility in order to ensure cross-disciplinary work
– Seamless integration of worldwide expertise into our local advice
– Effective deal management
– Transparency on costs and appropriate staffing
– Ability to draft and develop tailored documentation meets access to a rich stock of well-engineered precedents
– Beneficial experience as adviser of agencies and loan administration
– Strong and experienced legal teams of local law experts in constant international exchange with other Allen & Overy teams
– Creation of new market standards due to innovative solutions
Banking and Finance
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düsseldorf
Allen & Overy LLP Bockenheimer Landstraße 2 60306 Frankfurt am Main
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Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee
or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings.
GLOBAL PRESENCE
Allen & Overy is an international legal practice with approximately 5,000 people, including some 527 partners, working in 44 offi ces worldwide. Allen & Overy LLP or an affi liated undertaking has an offi ce in each of:
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luxembourg
Allen & Overy 33 avenue J.F. Kennedy L-1855 Luxembourg PO Box 5017 L-1050 Luxembourg
Tel +352 44 44 55 1 Fax +352 44 44 55 222
Paris
Allen & Overy LLP 52 avenue Hoche CS 90005 75379 Paris Cedex 08France
Tel +33 1 40 06 54 00 Fax +33 1 40 06 54 54
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amsterdam
Allen & Overy LLP Apollolaan 15 1077 AB Amsterdam PO Box 75440 The Netherlands
Tel +31 20 674 1000 Fax +31 20 674 1111
YOUR KEY CONTACTS FOR DEBT FUNDS AND DIRECT LENDING
Dr Franz Bernhard HerdingPartner – Frankfurt am MainBanking & FinanceTel +49 69 2648 5712 [email protected]
Thomas Neubaum Partner – Frankfurt am Main Banking & FinanceTel +49 69 2648 [email protected]
Dr Walter Uebelhoer Partner – MunichBanking & FinanceTel +49 89 71043 [email protected]
Frank HerringPartner – Frankfurt am MainAsset Management & RegulatoryTel +49 69 2648 [email protected]
Dr Oliver WaldburgPartner – Frankfurt am MainBanking & Finance/RestructuringTel +49 69 2648 [email protected]
Dr Sven PrüferPartner – Frankfurt am MainCorporateTel +49 69 2648 [email protected]
Klaus HahneCounsel – Frankfurt am MainTaxTel +49 69 2648 [email protected]
John CoburnPartner – Frankfurt am Main Banking & Finance/English lawTel +49 69 2648 5493 [email protected]
Germany
UK
Jonathan BrownsonPartner – LondonBanking & FinanceTel +44 20 3088 [email protected]
Carolyn ConnerPartner – London Banking & FinanceTel +44 20 3088 [email protected]
Philip BowdenPartner – LondonBanking & FinanceTel +44 20 3088 [email protected]
James GrahamPartner – LondonBanking & FinanceTel +44 20 3088 [email protected]
© Allen & Overy LLP 2016
Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. Each partner contact listed here is a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings. Allen & Overy maintains a database of business contact details in order to develop and improve its services to its clients. The information is not traded with any external bodies or organisations. If any of your details are incorrect or you no longer wish to receive publications from Allen & Overy, please contact [email protected]
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Brice HenryPartner – ParisAsset Management & RegulatoryTel +33 1 40 06 53 [email protected]
Robin HarveyPartner – LondonBanking & FinanceTel +44 20 3088 [email protected]
Paul Peporté Counsel – LuxembougInternational Capital MarketsTel +352 44 44 55 711 [email protected]
Jean-Christian SixPartner – LuxembourgInternational Capital MarketsTel +352 44 44 55 [email protected]
Frank MausenPartner – LuxembourgInternational Capital MarketsTel +352 44 44 55 [email protected]
Henri WagnerPartner – LuxembourgInternational Capital MarketsTel +352 44 44 55 [email protected]
Jean-Christophe DavidPartner – ParisBanking & FinanceTel +33 1 40 06 53 [email protected]
Franz RaneroPartner – LondonInternational Capital MarketsTel +44 20 3088 [email protected]
Matt HuggettPartner – LondonAsset Management & RegulatoryTel +44 20 3088 [email protected]
Luxembourg
France
“The competencies of Allen & Overy LLP’s ‘innovative and flexible’ team go ‘far beyond legal advice,’ says client.”Legal 500 2012
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OUR EXPERTISE IN DEBT FUNDS AND DIRECT LENDING
A FUND ADVISED BY A LEADING GERMAN PRIVATE EQUITY COMPANY
on the unitranche financing in connection with the acquisition of a majority share in a telephone and communication systems company from the previous owners in a management buyout.
AUTOBAHN TANK & RAST GMBH
on its comprehensive refinancing including the placement of a EUR 240m PIK facility.
A LEADING GERMAN PRIVATE EQUITY COMPANY
on a unitranche acquisition and capex facilities financing in connection with the proposed acquisition of a service provider in the automotive sector.
A EUROPEAN DEBT INVESTOR
on the implementation of an international unitranche financing programme.
THE SPONSOR
on the financing of the buy-out of a European educational network provider involving a unitranche and revolving credit facility.
A LEADING PRIVATE EQUITY FIRM
in connection with a unitranche facility for one of its portfolio companies with operations in several European countries.
THE ARRANGER
of a unitranche facility to the bidder in relation to the buy-out of a German recycling company.
A DEBT INVESTOR
on the establishment of a concept for commoditised unitranche lending and investment in central Europe.
A LEADING PRIVATE EQUITY FIRM
on a unitranche facility for one of its portfolio companies with operations in several European countries.
GE CORPORATE FINANCE BANK
on the establishment of a leveraged loan fund for European investments and on the establishment of a senior secured unitranche loan fund which co-invests in first lien senior secured loans of middle market companies.
CEREA MEZZANINE
in relation to the mezzanine financing of the acquisition of Celluloses de la Loire by Motion Equity Partners.
LFPI MEZZANINE
in relation to the mezzanine financing of the acquisition of Ergalis by LFPI.
CEREA MEZZANINE
in relation to the PIK financing and mezzanine financing of the acquisition of Labeyrie by PAI.
EUROMEZZANINE
in relation to the mezzanine financing of the ‘public-to-private’ acquisition of CNIM by Soluni.
LATOUR CAPITAL
in relation to the unitranche financing of the acquisition of Risk & Co by Latour Capital. Unitranche financing was provided by European Capital.
CIC MEZZANINE AND EUROPEAN CAPITAL
in relation to the mezzanine financing of the acquisition of Poult Group by Qualium.
LFPI MEZZANINE
in relation to the mezzanine financing of the acquisition of ItalExpress by Azulis.
EUROPEAN CAPITAL ANDTIKEHAU ASSET MANAGEMENT
in relation to the unitranche financing of the acquisition of IN-SEEC by Apax PE.
EUROMEZZANINE
in relation to the mezzanine financing of the acquisition of Cyrillys Vertbaudet by Alpha Capital.
CEREA MEZZANINE
in relation to the mezzanine financing of the acquisition of BCF.
LFPI MEZZANINE
in relation to the mezzanine financing of the acquisition of QCNS by Duke Street.
Banking & Finance
Allen & Overy means Allen & Overy LLP and/or its affiliated undertakings. The term partner is used to refer to a member of Allen & Overy LLP or an employee or consultant with equivalent standing and qualifications or an individual with equivalent status in one of Allen & Overy LLP’s affiliated undertakings.
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A GERMAN BANK
on the establishment of an infrastructure loan fund.
THE ALTERNATIVE INVESTMENTBRANCH OF AN INTERNATIONAL BANK
on loan funds, including distressed debt funds.*
A GERMAN MARKETINFRASTRUCTURE PROVIDER
on a loan fund and loan trading platform.
MACQUARIE BANKINTERNATIONAL LIMITED
on the launching of a Luxembourg fund of infrastructure funds in the form of a specialised investment fund.
DEKA IMMOBILIEN GMBH
on the setting-up of a real estate debt investment platform consisting of several specialised investment funds in the form of a SICAV-SIF.
DEUTSCHE BANK
on the establishment of a fund to invest in illiquid or distressed interests in hedge funds.
ARES
on the establishment of a specialised investment fund investing in syndicated bank loans, syndicated credit facilities and other debt securities, listed on the Luxembourg stock exchange.
REACAPITAL ADVISORS
on the launch of an investment company in risk capital having a mezzanine strategy focussed on Greek based SMEs.
A UK-BASED ALTERNATIVEASSET MANAGER
on its participation in a government backed fund which aims to increase lending to small and mid-sized companies via non-bank channels.
A U.S. CONGLOMERATE
on establishing a loan fund which co-invests in first lien senior secured loans of middle market companies.
NOMURA
on the establishment of its EUR350m European Mezzanine Fund to provide mezzanine and other subordinated capital focused on European leveraged finance and growth capital transactions.
CHRISTOFFERSON, ROBB & COMPANY
on the establishment of a credit fund using a Cayman structure.
RIVAGE INVESTMENT
on the structuring and launch of an infrastructure loan fund.
BNP PARIBAS
as sponsor on the establishment of a debt fund.
CQS
on the establishment of open ended debt/credit funds and related regulatory and tax matters.
MACQUARIE GROUP
on their infrastructure debt management arrangements.
ARES
on the establishment of a distressed debt specialised investment fund, listed on the Luxembourg stock exchange.
ALGEBRIS INVESTMENTS (UK) LLP
an affiliate of TCI, the London-based hedge funds, on the launching of a EUR500m fund investing in Italian non performing loans.
TISHMAN SPEYER
on the establishment of its real estate debt fund (which was not launched due to the financial crisis).
JPMORGAN ASSET MANAGEMENT
on various types of close-end private lending funds.
JPMORGAN INVESTMENTMANAGEMENT INC
in connection with the setting up of a Luxembourg securitisation platform issuing multiple series of notes linked to infrastructure debt located in various countries.
AN ALTERNATIVE INVESTMENT ADVISER
on all the Luxembourg legal and tax aspects of the acquisition of German distressed assets. The acquisition structure was based on a Luxembourg securitisation company which invests into German real estate assets (through PropCo structures) and related non-performing loan portfolios.
TWO BANKS
on the setting-up of a Luxembourg securitisation vehicle under the Luxembourg act dated 22 March 2004 on securitisation and on a number of securitisations by this vehicle of non performing Greek consumer loans.
NORGES BANK
a Norwegian bank, in connection with the creation of a joint venture with AXA for the repackaging of high end real estate debt investments originating from various EU countries. The Norges Bank investment was structured via a Luxembourg securitisation vehicle.
CREDIT SUISSE
in connection with the creation of a joint venture with Apollo via a Luxembourg securitisation company for a multi-billion repackaging of real estate mortgage loan.
Debt Fund Establishment and other related experience
*This transaction was completed by our lawyers prior to joining Allen & Overy.
