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Evolve or perish


  • pg 1
									                              CAPITAL MARKETS REVIEW 2006

                                        aw firms aren’t traditionally the nimblest of organizations.
                                        Though innovative in how they solve problems, lawyers have
                                        always been rather reactive when it comes to market trends.
                                        Recently however, heads of capital markets are realizing the
                             profit to be made by moving first. Whether the trend is Chinese
                             companies listing in Hong Kong, synthetic CDOs in the US or hybrid
                             debt in Europe, the past year has shown the benefits of spotting a trend
                             early and adapting a firm’s business model to take full advantage.
                                This is the IFLR Capital Markets Review 2006, annual analysis of the
                             biggest financial and product trends of the past year and how they are
                             affecting the business of running a law firm. Over the next 18 pages IFLR
                             journalists look at what has been driving the equity capital markets, debt
                             capital markets and structured finance in Europe, the Americas and Asia
                             in 2006. It also ranks the elite of recommended firms in each practice
                             area, in each jurisdiction.
                                European structured finance has been characterized by the need to
                             avoid commoditization, while in the US the challenge for law firms is
                             how to jump on the bandwagon of synthetic CDOs. Equity was more
                             similar worldwide, with UK firms benefiting from the reaction to
                             Sarbanes-Oxley by picking up mandates on new listings in Hong Kong
                             and on London’s Aim. In debt, the two hot topics were hybrids and high
                             yield – but UK and US firms found different problems with capitalizing
                             on them.
                                The Capital Markets Review also includes a breakdown and ranking of
                             how firms have coped with capital markets fluctuations in the world’s 24
                             biggest or most dynamic economies. The one consistent message is that
                             equity markets worldwide have performed strongly, with new offerings
                             doubling in Brazil, almost tripling in Italy and more than quadrupling in
                             Germany compared to 2005. The question is, which firms have benefited
                             from having a strong equity practice to begin with, and which have
                             evolved to take advantage of the trend?

                        or perish
                        How firms adapted to
                        changing markets in 2006

12 IFLR/November 2006                                                                    www.iflr.com

                                                                                                               advice to the managers and NXP respectively,

    An integrated                                                                                              the bond is governed by New York law and the
                                                                                                               lead advisers were Sullivan & Cromwell and
                                                                                                               Simpson Thacher for NXP and Davis Polk &
                                                                                                               Wardwell for the managers.

    practice stream                                                                                               But European law firms are aware that
                                                                                                               challenging the US firms on the manager side
                                                                                                               is unrealistic. Instead, the strategy of building
                                                                                                               capacity at European firms is designed to
                                                                                                               demonstrate to corporate banking clients that
    Why blending bond and bank capacity is the best way                                                        the firm can handle the full range of financing
    to win debt work in a modern, fluid market                                                                 advice.
                                                                                                                  Freshfields, for example, is pushing its high

                       ou have to be able to tick all    significant in Europe. Companies with non-            yield practice and the firm has had success
                       the boxes,” says Tim Jones,       investment grade credit ratings (below                winning issuer work from Germany,
                       joint head of Freshfields         triple-B with rating agency Standard and              including instructions for Unity Media and
                       Bruckhaus          Deringer’s     Poor’s) are raising more money than ever in           manufacturer Flender, through lead partners
    securities practice. The top clients (including      European debt markets. Although strong                Sarah Murphy and Don Guiney. The firm is
    sponsors, banks and issuers) all demand that         liquidity in loan markets such as second lien         looking to develop the practice in the UK, an
    their legal advisers now provide the full range of   and mezzanine finance continues to attract            aspiration matched by competitors including,
    financing options. Law firms hoping to win the       mid-sized European companies, high yield              but not limited to, Clifford Chance, Allen &
    big acquisition finance mandates have to be          remains a healthy product and asset class,            Overy and Herbert Smith.
    able to show they can offer capacity that            according to Fitch Ratings. In its September             “High yield is where the different practices
    extends beyond syndicated lending and straight       2006 special report on the European                   meet,” says Jones at Freshfields. “It gives you
    debt to mezzanine finance, high-yield and,           leveraged credit market Fitch shows that              a way into companies.” Offering a high yield
    increasingly, hybrid capital.                        European high yield issuance, at 19.4                 debt capability is seen as the best way of
       “There is a lot of overlap between bank and       billion for the first half of this year, was at its   bringing together private equity and public
    bond debt and so much liquidity available            strongest since 2001. Deals such as NTL, Avis         M&A partners with their capital markets
    that banks need to present sponsors and              and Ashtead Capital in the summer mean that           colleagues. The interface between different
    corporates with a range of options,” says            the European high yield market is set to break        parts of the business through high yield debt
    Rachel Hatfield at White & Case. “They               its issuance record of 29.4 billion set in            is an important connection for firms’ internal
    expect a mirror image of themselves in their         2004, according to Fitch.                             communication and knowledge pooling, as
    law firms.”                                                                                                well as for impressing clients. “More joined-
       High yield debt immediately looks the odd         How to compete with the US                            up thinking is required,” says securities
    one out for European practices. Although             The trouble, for European firms, is that high         partner Stephen Miller at Allen & Overy.
    mezzanine finance and second lien continue           yield debt is typically arranged by US law            “Companies need to get their debt and equity
    to represent a viable alternative to high yield,     firms, either from New York or through the            mix exactly right and capital management is
    with buyout examples including Orangina,             London offices of top manager firms such as           now a big thing for businesses, which need to
    Gala and Amadeus, today offering high yield          Latham & Watkins, Cravath Swaine & Moore              ensure balance sheets are optimized.” Miller
    expertise is vital to a firm’s credibility with      and Simpson Thacher & Bartlett. The latest            thinks that this trend helps explain the rise of
    sponsor clients. But the product is stubbornly       data from Thomson Financial show that Cahill          hybrid capital among European companies.
    US-dominated and seems likely to stay that           Gordon and Shearman & Sterling are also
    way.                                                 prolific advisers on international high yield         Hybrids present a way in
       “The high yield market is sewn up on the          debt. These five US law firms accounted for 55        IFLR reported bankers saying in March this
    bank side in Europe,” says Jim Wickenden,            of the 78 adviser-instructed manager deals            year that corporate hybrid capital is the biggest
    global head of capital markets at Herbert            recorded by Thomson for the second quarter of         step forward in international finance since the
    Smith. “It is very much a US product and             this year. Lawyers point to Dutch computer            birth of high yield debt, with some predicting
    although others are trying to break into the         chip manufacturer NXP’s recent 4.5 billion            up to $40 billion this year in the US alone. A
    market it is very difficult to get traction.”        high yield bond, the biggest ever by a                valuation dispute sparked by a decision of US
    Wickenden says Asian high yield is more              European borrower, to demonstrate the                 insurance valuation authorities in March now
    open and non-US firms have had more                  difficult task Europeans face in breaking into        makes that estimate optimistic, but European
    success there in convincing banks to hire.           high yield debt. Although Dutch firms Stibbe          deals such as Vattenfall and Porsche last year
       High yield debt has never been so                 and De Brauw Blackstone provided Dutch law            demonstrate the value of hybrid instruments to
                                                                                                               companies wishing to raise capital without
     High yield: manager legal advisers                                                                        risking ratings downgrades or diluting their
                                        Ranked by deal size                                                    equity. Practitioners are divided on whether
     Legal adviser                     No of issues  Rank Mkt share                   Proceeds ($mil)          there will be an explosion of issuance or a more
     Latham & Watkins                      21              1       18.5                  10,745.90
                                                                                                               gradual development in Europe, but they are
     Shearman & Sterling                   12              2       16.3                   9,461.10             keen to see the product take off: the fees levied
     Cahill Gordon & Reindel               12              3       15.3                   8,849.30             on bespoke hybrid bonds are more than double
     Cravath Swaine & Moore                 4              4        6.8                   3,924.60             the rate for traditional bond issues.
     Simpson Thacher & Bartlett             6              5        6.4                   3,717.40                Lawyers predict that over time there will be
     Allen & Overy                          3              6        3.7                   2,127.70             more demand for the integrated approach to
     Weil Gotshal & Manges                  3              7        2.4                   1,407.30             advising on capital structure. “Clients may
     Vinson & Elkins                        3              8        2.3                   1,307.10             not know, at the time of instruction, whether
     Bonelli Erede e Pappalardo             1              9        2.1                   1,199.30             a particular tranche will be in bond or loan
     Kirkland & Ellis                       1             10        1.7                   1,000.00             structure,” says Hatfield at White & Case.
     Total with adviser                    78                                            46,726.40             “You need to be able to advise on the merits
     Industry total                        96                                            58,021.70             of both.”                                   DA
     International high yield issues January 1 to June 30 2006. Source: Thomson Financial

www.iflr.com                                                                                                                   IFLR/November 2006 13

Innovators needed
                                                                                                               Pre-cooked securitization
                                                                                                               One trend to watch out for is the conver-
                                                                                                               gence of securitization with other forms
                                                                                                               of finance. Companies are now inserting

Firms need to find a way to cope with commoditization                                                          securitization enabling or clearing
                                                                                                               clauses into their lending agreements,

             he European securitization industry        against judging entire asset classes as                giving the company the option to
             is on track to beat last year’s issuance   commoditized, stressing that what is established       securitize revenues in the future. This
             record of        327 billion. The          and routine in one country can be complex and          method of obtaining permission, or pre-
             European Securitisation Forum cites        groundbreaking in another, and that anything           cooked securitization, means that
new issuance volume of 106.1 billion for the            multi-jurisdictional poses unique challenges.          issuers will no longer have to go through
second quarter of this year (the second highest         The crucial test is: has this been done before? If     the costly and time-consuming exercise
quarterly volume ever) and points to mortgage-          it has, the chances are the product will be            of obtaining consents from the lending
backed and collateralized debt obligation               quickly commoditized. Publicity prevents the           agent.
(CDO) issuance as leading contributors to               technology becoming proprietary.                            This is a reflection of the amount of
growth. Securitization lawyers surveyed by IFLR            “Commoditization means law firms must               money around for levered deals.
are similarly sanguine about the market for their       work out how to keep at the innovative edge of         Research from Standard and Poor’s
product. But away from issuance volumes,                the market,” says Salim Nathoo, Allen &                leveraged commentary shows that the
German mortgage markets and the European                Overy’s recently appointed head of                     ratio of total debt to earnings rose to a
Commission’s Capital Requirements Directive,            securitization. “The challenge is to break open        multiple of 5.8 this September, beating a
the big trend structured finance lawyers are            new markets for existing technology, which has         previous high of 5.7 for leveraged
talking about is the commoditization of their           become commoditized, while working on new              buyouts (LBOs) in the first quarter of this
technology.                                             transactions and structures.”                          year. Securitization specialists
   “This year has not been phenomenally                    Nathoo thinks European securitization               expressed fears that one of these big
exciting,” says Julian Tucker, head of structured       practices will increasingly look to emerging           leveraged buyouts could default, but say
finance at Shearman & Sterling. “There have             markets and infrastructure, citing deals such as       that, whatever the outcome of the trans-
been lots of repeat issues as products have             the UK Ministry of Defence’s Skynet                    actions, securitization lawyers will
become more commoditized. While there have              refinancing and the SovRisc export loans               become more familiar with their banking
been developments on existing structures, take          securitization. The SovRisc transaction                and debt finance colleagues as LBO
the Washington Mutual covered bond, they are            introduced of a new asset class and was awarded        sponsors look to asset-backed securiti-
based around existing market concepts.”                 IFLR’s 2006 European securitization deal of the        zation and clients demand seamless
   Legal advisers that work on innovative               year. Others agree with Nathoo, pointing to            finance advice across practice areas.
securitization structures are, in one sense, a          Russian receivables deals from Home Credit and              The move has been anticipated by
victim of their own success. Public documents           Finance Bank and Red Arrow International               some law firms. White & Case has
available through the US Securities and                 Leasing as well as insurance securitization from       merged its London structured finance
Exchange Commission’s Edgar (electronic data            Swiss Re and Axa and commercial real estate            and capital markets departments, while
gathering, analysis and retrieval) service mean         CDOs as exciting prospects.                            others expect to see more convergence
that anyone can take a look at how the latest              But lawyers caution that these deals will in        of securitization with other types of
deal has been produced and reverse engineer the         turn become commoditized necessitating                 finance, particularly acquisition finance.
product for their own ends. Commoditization is          further innovation and the introduction of new         Although bigger firms in Europe have yet
therefore an inevitable result of innovation and        asset classes to the market. “The innovative edge      to formally merge their practice areas,
publicity.                                              of the market is cross boarder pan-European            lawyers predict that other firms in the UK
   What constitutes commoditized business?              deals where different insolvency regimes slow          market could follow suit and there is at
Lawyers disagree on the precise parameters, but         down the process of commoditization,” says             least recognition that partners need to
many point to master trust structures,                  Nathoo. “But the process is not stopped as             pool their efforts across practice groups.
residential mortgaged-backed securitizations,           people have been through these transactions            Although initially confined to the UK
credit card deals and even some commercial              before and have become familiar with the               market (which accounted for 54% of total
mortgage-backed          transactions.       Despite    techniques.” Nathoo cites European trade               European issuance in the second quarter
agreement on these areas, advisers caution              receivables transactions as an example of how          of this year), lawyers say the move
                                                        commoditization progresses even through                toward practice convergence will
 UK securitization                                      multi-jurisdictional deals.                            eventually impact on lawyers in other
Recommended firms                                           The process of product commoditization is          leading European jurisdictions including
Tier 1                                                  an issue for all the big firms. Once banks             Spain, Italy, Germany and The
 Allen & Overy                                          perceive technology to be commoditized they            Netherlands.
 Clifford Chance                                        will only accept charges that reflect that. But
Tier 2
                                                        these deals still require resources. Lawyers say      associates to service clients’ repeat issue volume
                                                        deals that banks perceive to be routine can still     business. Specialists say banks are aware of this.
 Freshfields Bruckhaus Deringer
                                                        be relatively labour intensive, with a lot of         And they have issues with all their deals being
                                                        detailed documentation.                               done by associates.
 Sidley Austin
                                                           “You need an awful lot of bodies to handle            “One has to ask how long can you keep a
Tier 3                                                  these deals, however commoditized they are,”          bright, clever, three-years or so qualified
 Ashurst                                                says Tucker. “Banks have become tight on              associate happy doing these commoditized
 Slaughter and May                                      pricing and margins have been squeezed, often         deals?” says Tucker. “That is why a number of
 Weil Gotshal & Manges                                  with large write-offs for the lawyers. This sort of   them are leaving to join banks.” Associates are
Tier 4                                                  work ties up many talented young associates,          prepared to sacrifice the chance to make partner
 Cadwalader Wickersham & Taft                           leaving less capacity for the more innovative         to go in-house for work that better matches
 Herbert Smith                                          transactions.”                                        their expectations. Losing staff to bank clients
 Lovells                                                   While there are lots of superstar securitization   can actually prove beneficial for law firms, but
 Simmons & Simmons                                      partners in Europe, and in the London market          the difficulty is that this attrition leaves fewer
 White & Case                                           in particular, these people need back up from         bodies to handle the same level of work. DA

14 IFLR/November 2006                                                                                                                             www.iflr.com

                                                                                                          guaranteed profit and refused to approve the

    Reaping rewards                                                                                       notes.
                                                                                                             But this furore was itself a result of the fact
                                                                                                          that there were simply more pre-IPO
                                                                                                          convertibles coming out of Asia this year. A
    How Linklaters has gained from more innovative convertibles                                           lot of property companies in China were
                                                                                                          looking to list or exit private equity

                 radually, the convertible bond        bondholders a way in to an expected flotation      investments, and any producer connected
                 market is changing. Issuers are       before other investors, have been around for a     with raw materials such as oil, gold or steel
                 becoming more innovative, pre-        good few years – they were particularly            was looking to float and benefit from high
                 IPO deals and mandatory               popular in Asia during the technology boom         commodity prices.
    exchangeables are becoming more common,            there. But 2005 saw the first two completed           Law firms and banks are also becoming
    and the dominant firms in what was once a          in Germany, a furore over new issues in Hong       more creative with equity-linked products.
    highly commoditized market are reaping the         Kong and the first shariah-compliant issue         For example, German chemicals group Bayer
    benefits.                                          from Dubai.                                        issued a 2.3 billion mandatory convertible
        The changes are hard to pick up, largely          The problem in Hong Kong was that some          in June this year that was not only unusual in
    because the convertible bond market is very        issuers and their legal advisors tried to change   its size and mandatory nature, but was also
    cyclical: when equity markets are hot, as they     the structure of the convertible to give           one of the first to be used as part of a
    are now, investors want different ways to          investors a guaranteed return on IPO. Rather       company’s regulatory capital. And Weather
    access it; when the markets cool off, investors    than allow bondholders to exchange their           Capital Finance issued a novel 825 million
    return to fixed income or alternative assets. So   notes for shares at a certain (favourable) price   pre-IPO convertible (see table) that was
    it’s only at the peak of the cycle that the        after the flotation, the bonds allowed them to     initially convertible into shares of Orascom
    innovations and fundamental shifts in              do so for a certain percentage discount on         Telecom but, on a qualifying event, could be
    demand can be seen.                                whatever the IPO price turned out to be. The       converted into alternative stock.
        Pre-IPO convertibles, which give               Hong Kong regulator took against this                 Simon Sinclair, a partner at Clifford

     A selection of 2006 pre-IPO convertible bonds

      Issuer                     Issuer counsel            Underwriter                Underwriter counsel        Deal value      Deal description

      Golden State               Herbert Smith on          Merrill Lynch, The         Linklaters. Simpson        $150            Guaranteed secured
      Environment Group          English, Hong             Bank of New York           Thacher & Bartlett also    million         convertible notes due
                                 Kong and US law;                                     advised certain                            2013. Largest ever
                                 Maples & Calder                                      investors on US law                        pre-IPO convertible
                                 on Cayman law;                                                                                  bond offering by a
                                 King & Wood on                                                                                  company in the greater
                                 PRC law                                                                                         China region
      Greentown China            Herbert Smith on          JP Morgan                  Linklaters for JP          $130            $65m secured non-
      Holdings                   English law;                                         Morgan. For the sole       million         mandatory convertible
                                 Maples & Calder                                      manager: Sidley Austin                     bonds due 2011 and
                                 on Cayman and                                        on English law; King &                     $65m secured
                                 BVI law; T&C Law                                     Wood on PRC law;                           mandatory convertible
                                 Office on PRC Law                                    Allen & Gledhill on                        bonds
                                                                                      Singapore law
      Angara Gold                Skadden Arps              Nomura                     Linklaters on English      $50.1           $50.1 million 7% bonds
                                 Slate Meagher &           International and          law; Chrysses              million         due 2008 (with condi-
                                 Flom: legal adviser       Uralsib Securities         Demetriades & Co on                        tional conversion rights
                                 to Angara Mining                                     Cypriot law                                into shares of Angara
                                 and JSC                                                                                         Mining). The first pre-IPO
                                 Vasilevsky rudnik                                                                               convertible bond by a UK
                                 Gold mine as to                                                                                 issuer
                                 English and
                                 Russian law
      Weather Capital            White & Case,             Citigroup, Credit          Linklaters                  825            4.75% secured
      Finance                    Arendt &                  Suisse, Deutsche                                      million         guaranteed
                                 Medernach and             Bank                                                                  exchangeable bond
                                 Dewey Ballantine                                                                                due 2013 initially
                                                                                                                                 exchangeable into
                                                                                                                                 existing GDRs repre-
                                                                                                                                 senting Ordinary
                                                                                                                                 Shares of Orascom
                                                                                                                                 Telecom Holding
      Dubai Ports World          Clifford Chance           Barclays Bank,             Denton Wilde Sapte         $3.5 billion    The world's largest
                                                           Dubai Islamic Bank                                                    single sukuk issue, the
                                                                                                                                 first sukuk issue to be
                                                                                                                                 convertible into equity
                                                                                                                                 upon an IPO, and the
                                                                                                                                 first sukuk to be listed
      As many pre-IPO convertible bonds are private transactions, this list does not purport to be exhaustive                    on DIFX

www.iflr.com                                                                                                               IFLR/November 2006 15

 Hong Kong debt markets                             down the credit spectrum in recent years,
                                                    fuelling a rise in issuance. Says Ben Dulieu,
Recommended firms
Tier 1
                                                    partner at Linklaters in London: “Convertible
                                                    bonds used to be seen as investment grade,
                                                    big company products. But in recent years
                                                                                                      “Winning work in
 Allen & Overy
                                                    more and more small, high-growth companies
                                                                                                      this area is
 Clifford Chance
                                                    have been looking to convertibles as a way to
 Davis Polk & Wardwell
                                                    raise growth capital, as an alternative to        becoming more self-
                                                    private equity funding.” Recent examples
Tier 2                                              include oil exploration company Afren, which      perpetuating. Doing
 Cleary Gottlieb Steen & Hamilton                   issued an as-yet unlisted bond this year, and
 Milbank Tweed Hadley & McCloy                      Angara (see table).                               the last deal pushes
 Skadden Arps Slate Meagher & Flom                     Not only does the table reveal the number
Tier 3
 Freshfields Bruckhaus Deringer
                                                    of smaller, high yield issuers of pre-IPO
                                                    convertibles this year, it also illustrates the
                                                                                                      you onto the next                       ”
 Herbert Smith                                      dominance of a few firms in the roles advising    Ben Dulieu, Linklaters
 Mallesons Stephen Jaques                           the banks and issuers. Linklaters has always
 Shearman & Sterling                                had a dominant role in equity-linked advice.
 Sidley Austin                                      In IFLR’s equity survey in 2005, for example,     confirms that one mandate tends to follow
Tier 4                                              the firm completed 119 bonds, 103 more            another: “Winning work in this area is
                                                    than its nearest competitor, Clifford Chance.     becoming more self-perpetuating. Doing the
 Baker & McKenzie
 Richards Butler
                                                    The majority, 79, of those were in Asia, and      last deal pushes you onto the next,
 Sullivan & Cromwell
                                                    on all but three Linklaters advised the banks.    particularly if you introduced something
 White & Case                                       That trend can be seen on the table here,         innovative and can go into the market and
                                                    where Linklaters advised on four of the five      talk about it.”
                                                    selected deals, and all for the underwriters.        Other firms that have performed well in
Chance in London, says: “Although                      It had been suggested in the past that         Asian convertible this year are Herbert Smith
convertible bonds are really driven by frothy       Linklaters’ domination of the equity-linked       and Sidley Austin. Herbert Smith advised the
equity markets, there has been an increase in       market wasn’t necessarily the most profitable     issuer on both the Golden State and
issuance and creativity in recent years. This       one, as deals became more and more                Greentown China pre-IPO convertibles this
has been particularly evident in the last five      commoditized and fees were squeezed               year, and says it has several others in the
years as hedge funds have become more active        accordingly. But this recent rise in innovation   pipeline. Equally Sidley Austin, though it
in this area, looking to convertibles as another    suggests that the firm is now reaping the         works on more private transactions that are not
way to access the stock markets.”                   benefits of its position in the market, with      listed here, says it has two more in the pipeline
   Convertible bonds have also gradually crept      more structured, profitable deals. Dulieu         in Asia that should close this year.         SC


All aboard
US stock exchanges’ loss is UK law firms’ gain in Hong Kong

                  hen a company chooses to          developments such as the 2002 Sarbanes-
                  launch the world’s biggest        Oxley Act and in particular Section 404,
                  ever IPO on an exchange           which requires companies to review their
                  that just a few years ago saw     own financial reporting processes, as well as
half the number of listings as the London,          US generally accepted accounting principles
New York or Nasdaq markets, something is            requirements, the perception of higher
going on. In fact, a lot is going on in Hong        litigation and liability risks, and the
Kong, and UK law firms are among those              complexity of deregistering from the SEC as
taking full advantage.                              strong disincentives to listing on US stock
   According to data from Dealogic, in the          exchanges.
first nine months of 2006 Chinese equity               These warnings seem to be bearing fruit.
issuance was up 83% over the same period            Although unregistered 144A tranches have
last year to a record $25.2 billion. And that       remained a feature of most offerings, the
was before ICBC hit the streets last month
with its world-beating $22 billion IPO. The
                                                    number of foreign companies listing on the
                                                    New York Stock Exchange has fallen to an
                                                                                                      “The number of
deal outshines the previous largest offering,       average of 18 per year between 2003 and           times I have to
NTT DoCoMo’s $18 billion flotation in               2005 from an average of 48 per year between
1998, and makes a bold statement about              2000 and 2002.                                    advise on English
global equity market competition.                      And the winners in all this? On one hand
   For years, critics have been warning that
what they see as the over-regulation of
                                                    exchanges in Brazil and India are attracting a
                                                    healthier proportion of their domestic
                                                                                                      law could be count-
companies who list their shares in the US will
drive away foreign companies who have
traditionally listed in what is still the world’s
                                                    issuers. At the same time markets perceived
                                                    to have a lighter regulatory touch, such as
                                                    London’s Aim and the Hong Kong Stock
                                                                                                      ed on one hand                     ”
                                                                                                      Michael Fosh, Herbert Smith
largest capital market. They point to               Exchange, are winning foreign listings that

16 IFLR/November 2006                                                                                                                    www.iflr.com
                                                                                                                        ASIAN EQUITY

     Top 20 Chinese/Hong Kong IPOs 2006 YTD
     Issuer             Value       Bookrunner         Issuer counsel                                 Underwriter counsel
                        $ million
                                                       Hong Kong        US law         PRC law        Hong Kong       US law          PRC law
                                                       law                                            law

    ICBC                $ 22,000    Merrill Lynch,     Herbert Smith   Davis Polk &    King & Wood    Freshfields     Shearman &      Haiwen &
                        (approx.)   Deutsche Bank,                     Wardwell                                       Sterling        Partners
    Bank of China       $ 11,186    Bank of China      Freshfields     Sullivan &      Jun He Law     Allen & Overy   Shearman &      King & Wood
                                    International;                     Cromwell        Office                         Sterling
                                    Goldman Sachs;
    Shui On Land        $   879     JP Morgan;         Freshfields     Freshfields     Jin Mao Law    Allen & Overy   Allen & Overy   Commerce &
                                    HSBC;                              (and English    Firm                           (and English    Finance
                                    Deutsche Bank                      law)                                           law)
    Champion Real       $   812     Citigroup; JP      Baker &         Baker &                        Freshfields     Freshfields
    Estate                          Morgan;            McKenzie        McKenzie
    Investment Trust                Merrill Lynch      (to manager)    (to manager)
    Shimao Property     $   551     Goldman Sachs;     Freshfields     Freshfields     Commerce &     Herbert Smith Herbert Smith     Fangda
    Holdings                        Morgan Stanley                                     Finance                                        Partners
    Nine Dragons        $   504     BNP Paribas;       Sidley Austin   Sidley Austin   Jingtian &     Baker &         Baker &         Commerce &
    Paper (Holdings)                Bank of China                                      Gongcheng      McKenzie        McKenzie        Finance
                                    Merrill Lynch
    Greentown           $   395     JP Morgan;         Herbert Smith   Herbert Smith T&C Law Firm Sidley Austin       Sidley Austin   King & Wood
    China Holdings                  UBS
    China               $   393     JP Morgan;         Baker &         Baker &         Jun He Law     Herbert Smith Herbert Smith     Commerce &
    BlueChemical                    UBS                McKenzie        McKenzie        Offices                                        Finance
    Dalian Port         $   321     BNP Paribas;       Morrison &      Morrison &      Jingtian &     Norton Rose     Norton Rose
                                    UBS                Foerster        Foerster        Gongcheng
    China National      $   267     Morgan Stanley     Slaughter and   Davis Polk &    Jingtian &     Linklaters      Linklaters      Haiwen &
    Building Material                                  May             Wardwell        Gongcheng                                      Partners
    Hunan               $   263     Bank of China      Sidley Austin   Sidley Austin   Jia Yuan Law   Lovells         Lovells         Commerce &
    Nonferrous                      International;                                     Firm                                           Finance
    Metals                          Morgan Stanley
    Golden Eagle        $   210     ABN AMRO           Sidley Austin                   Chen & Co      Coudert/Orrick Coudert/Orrick   Global Law
    Retail Group                    Rothschild;                                                                                       Office
                                    Capital (Asia)
    Shanghai Prime      $   187     Credit Suisse      Freshfields     Freshfields     Jun He Law     Sidley Austin   Sidley Austin   Commerce &
    Machinery                                                                          Offices                                        Finance
    Tianjin Port        $   161     ABN AMRO           Sidley Austin                   Global Law     Lovells
    Development                     Rothschild;                                        Office
    Holdings                        Calyon
    SPG Land            $   154     DBS;               Jones Day                       Jun He Law     Johnson
    (Holdings)                      Macquarie                                          Offices        Stokes &
                                    Securities                                                        Master
    Lingbao Gold        $   128     Bank of China      Mallesons                       Commerce &     Jones Day
                                    International      Stephen                         Finance
    Win Hanverky        $   101     DBS                Deacons                         Jingtian &     Norton Rose
    Holdings                                                                           Gongcheng
    Advanced            $   96      Bank of China      Freshfields     Freshfields     Jingtian &     Linklaters      Linklaters      Haiwen &
    Semiconductor                   International;                                     Gongcheng                                      Partners
    Manufacturing                   Goldman Sachs
    Corp - ASMC
    Biosino Bio-        $   85      Partners Capital   Li & Partners                   JunZeJun       Chiu &
    Technology &                    International;                                     Law Offices    Partners
    Science                         SBI Crosby
    Beijing             $   76      DBS                Richards                        Zhonglun       Deacons                         JunZeJun
    Jingkelong                                         Butler                          Wende Law                                      Law Offices

     Deal values and ranking supplied by Dealogic

www.iflr.com                                                                                                          IFLR/November 2006 17

                                                  success on the US law side of the equation.        Hong Kong equity markets
                                                  Aside from the occasional multi-billion
                                                  dollar deal such as Bank of China and ICBC,       Recommended firms
                                                  the same firm usually now advises its client      Tier 1
                                                  on both Hong Kong and US law.                      Davis Polk & Wardwell
                                                     In part this is a result of the declining       Freshfields Bruckhaus Deringer
                                                  importance of the US law component of the          Linklaters
                                                  deal. With none of this year’s top 20 Chinese      Shearman & Sterling
                                                  IPOs including a US listing the work is            Sullivan & Cromwell
                                                  limited to 144A advice, which is less involved    Tier 2
                                                  and does not require a tie-in to a substantial     Allen & Overy
                                                  US practice. But it is also a reflection of the    Baker & McKenzie
                                                  fact that several UK firms have a longer           Cleary Gottlieb Steen & Hamilton
                                                  tradition of putting feet on the ground in         Herbert Smith
                                                  Hong Kong and have been building stronger          Simpson Thacher & Bartlett
                                                  Hong Kong teams by hiring local trainees as        Skadden Arps Slate Meagher & Flom
                                                  well as US lawyers. Herbert Smith, for            Tier 3
                                                  example, recently hired John Moore, a US-          Latham & Watkins
                                                  qualified senior counsel at Goldman Sachs.         Mallesons Stephen Jaques

“Hong Kong should                                    Winning work on PRC listings still
                                                  typically requires firms to leap beauty parade
                                                  hurdles. According to lawyers who take part
                                                                                                     Milbank Tweed Hadley & McCloy
                                                                                                     Norton Rose

be designing a                                    in them, Chinese clients are as interested as
                                                                                                     Sidley Austin

                                                  their counterparts elsewhere in factors such
prospectus that                                   as pricing, track record and expertise. Having     Hong Kong structured
                                                  the right relationship also helps. Herbert         finance
people would be                                   Smith, for example, had worked with ICBC
                                                  for years and in 2003 advised its Hong Kong       Recommended firms
able to read
Teresa Ko, Freshfields
                          ”                       subsidiary ICBC (Asia) on the acquisition of
                                                  Fortis Bank’s local retail and commercial
                                                                                                    Tier 1
                                                  operations. For its part Freshfields, in wooing    Paul Hastings Janofsky & Walker
                                                  the underwriters, can point to having advised     Tier 2
would traditionally have gone to New York.        on the first dual Hong Kong-New York               Freshfields Bruckhaus Deringer
For Aim, these have included notable Russian      listing in 1993, for Shanghai Petrochemical,       Jones Day
listings. For Hong Kong it is Chinese             and a number of landmark deals right up to         Mallesons Stephen Jaques
companies.                                        China Construction Bank, last year’s biggest
                                                                                                    Tier 3
   “The ongoing obligations have cast a bit of    IPO, and Bank of China, the largest Chinese
                                                                                                     Allen & Overy
a shadow over listing in the US,” says            IPO until ICBC.
                                                                                                     Clifford Chance
Freshfields’ Teresa Ko, who advised the banks        Aside from its size, the ICBC IPO was also
                                                                                                     Sidley Austin
on ICBC’s IPO. “It doesn’t take much to           notable for being the first to involve
                                                                                                     Simmons & Simmons
persuade an issuer to do an A and H listing       simultaneous A and H listings, posting its
rather than an A and N listing.”                  shares on both the Shanghai and Hong Kong
   Law firms with offices in Hong Kong have       exchanges. In the past many companies have        mandates for the law firms who work on
been among those to benefit from this trend.      listed first in Hong Kong and then later in       them. Increasing numbers of A and H listings
And among these, UK firms such as                 Shanghai, but doing so at the same time           will also help further stimulate the growing
Freshfields have been particularly successful,    requires careful negotiation of two very          sophistication and involvement of PRC law
even while English law has fallen out of use.     different regulatory regimes with different       firms in the listing process. Some lawyers at
Of the biggest IPOs of this year only one, for    disclosure requirements, timings and              foreign law firms predict that these firms will
Shui on Land, involved a UK component. As         prospectuses.                                     eventually become tough competitors for
Michael Fosh, Herbert Smith’s chief                  Convergence between the offering regimes       Hong Kong law work.
representative in Beijing and issuer counsel to   of Hong Kong’s Securities and Futures                While Hong Kong is enjoying its day in
ICBC notes: “The number of times I have to        Commission (SFC) and the China Securities         the equity sunshine, it is also looking to keep
advise on English law could be counted on         Regulatory Commission is unlikely any time        evolving on a regulatory level to make sure
one hand.”                                        soon. “I don’t think you’d ever see a situation   this is not a brief summer. “The Hong Kong
   Despite this, of the 10 largest Hong Kong      where they’re exactly the same – they’re very     securities market needs to look at what it can
IPOs of 2006 to date, eight of the Hong           different markets,” says Paul Chow of             do better,” says Teresa Ko. “One priority
Kong law underwriter mandates and six of          Linklaters in Hong Kong. But observers            should be designing a prospectus that people
the Hong Kong issuer roles have gone to UK        believe ICBC has set an important precedent       would be able to read.”
firms. UK firms are also enjoying increasing      that will lead to similar deals and interesting      In August 2005 the SFC issued a
                                                                                                    consultation paper on possible reforms that it
                                                                                                    hopes will do just that. It recently announced
                                                                                                    that it will be looking at some measures in
                                                                                                    more detail, including enabling information
“Of the 10 largest IPOs this year, eight of                                                         to be disclosed in a prospectus by reference to
                                                                                                    another source. The Hong Kong authorities
the Hong Kong-law underwriter mandates                                                              are also looking to attract issuers from
                                                                                                    outside the usual ranks of Chinese, Cayman
have gone to UK firms                             ”                                                 Island and Bermudan companies to new
                                                                                                    countries such as Australia. But for the time
                                                                                                    being they are doing fine without them. BM

18 IFLR/November 2006                                                                                                                  www.iflr.com

    Hybrid approach
    Should firms have dedicated teams for US hybrid securities?

               he capital markets occasionally like    ratings agency Moody’s began looking at
               to indulge in passing fads. In the US   hybrids, which are attractive to issuers
               this year, the hottest financial        because they can secure the favourable credit
               fashion has been the debt-equity        ratings associated with equity without losing
    hybrid security.                                   the tax-deductibility and lack of shareholder
       The market for hybrids has grown up fast.       dilution achieved by debt.
    According to Dealogic in the first nine               It was not until early 2005, however, that
    months of 2005 US hybrid capital issuance          Moody’s liberalized its framework for rating
    was worth $6 billion. Over the same period         hybrids following complaints that, in order to
    this year hybrids generated $28.4 billion. In      qualify for its basket C, securities had to be
    less than 18 months the market has celebrated      more equity-like than equity. In doing so it
    a new arrival, struggled through an awkward        opened the door for a new type of
    adolescent phase and now stands on the brink       instrument, which duly arrived in August
    of assured maturity.                               2005 in the form of Lehman Brothers’
       During this journey it has been helped by a     Enhanced Capital Advantaged Security
    small group of investment banks and law            (Ecaps). Sullivan & Cromwell represented
    firms, among which Sullivan & Cromwell,
    Simpson Thacher & Bartlett, Cleary Gottlieb
                                                       Lehman as issuer while Simpson Thacher
                                                       advised Lehman, with which it has a long-
                                                                                                            “Nine months from
    Steen & Hamilton and others have played            standing relationship, in its underwriter            now if a bank wants
    prominent roles. But the story begins in the       capacity.
    mid-1990s, when firms such as Sullivan &              The next stage in the development of              to do a basket D
    Cromwell helped financial institutions sell        hybrids saw a handful of corporate issuers,
    trust-preferred securities. Around that time       including Stanley Works and Burlington
                                                       Northern Santa Fe, reach first basket C then
                                                                                                            offering there’ll be a
     US debt and equity markets                        basket D, the Holy Grail for many issuers.
                                                       Sullivan & Cromwell was again involved,
                                                                                                            commonly agreed
     Recommended firms
     Tier 1
     Cravath Swaine & Moore
                                                       advising Citigroup Capital Markets and
                                                       Goldman Sachs as the lead initial purchasers
                                                       on the Stanley Works offering.
                                                                                                            structure         ”
                                                                                                            Robert Buckholz, Sullivan & Cromwell
     Davis Polk & Wardwell                                Arrangers then began to search for ways to
     Sullivan & Cromwell                               achieve the same results for bank holding
     Tier 2                                            companies. Although the product can be              for banks is including a mandatory payment
     Cleary Gottlieb Steen & Hamilton
                                                       useful in boosting the credit ratings of capital-   deferral trigger in order to satisfy Moody’s
     Shearman & Sterling                               intensive companies such as utilities and           demands for equity credit without falling foul
     Simpson Thacher & Bartlett                        railway operators, it is only likely to appeal to   of Federal Reserve requirements. Not to be
     Skadden Arps Slate Meagher & Flom                 a limited range of corporate issuers. Financial     denied, this summer JP Morgan developed a
                                                       institutions are a much bigger potential            structure to that helped first Capital One and
     Tier 3
                                                       market. The equity treatment of hybrids helps       then the bank itself achieve this. Sullivan &
     Cahill Gordon & Reindel
                                                       them achieve the investment grades they             Cromwell was special product counsel on the
     Gibson Dunn & Crutcher
                                                       need, and with billions of dollars of trust         Capital One deal having worked with JP
     Latham & Watkins
                                                       preferreds due to expire many are looking for       Morgan to design the structure. Morrison &
     Sidley Austin
                                                       attractive alternatives.                            Foerster,     Capital     One’s     designated
     Weil Gotshal & Manges
                                                          One of the difficulties in designing hybrids     underwriter counsel, acted for the banks on

     Hybrid deal picks
     Highlights from a busy year for US hybrids

      Issuer                             $ million        Issuer counsel                                   Underwriter counsel

      Lehman Brothers Ecaps                    300        Sullivan & Cromwell                              Simpson Thacher & Bartlett
      Stanley Works                            450        NA                                               Sullivan & Cromwell
      RGA                                      400        Bryan Cave                                       Davis Polk & Wardwell
      Zurich Financial                       1,300        Willkie Farr & Gallagher                         Simpson Thacher & Bartlett
      Swiss Re                                 750        Paul Weiss Rifkind Wharton & Garrison            Willkie Farr & Gallagher (US)
      Lincoln National                         800        LeBoeuf Lamb Greene & MacRae                     Sullivan & Cromwell
      UBS                                    1,000        Sullivan & Cromwell                              Davis Polk & Wardwell
      American Express                         750        Cleary Gottlieb Steen & Hamilton                 Skadden Arps Slate Meagher & Flom
      Capital One Capital III                  650        Cleary Gottlieb Steen & Hamilton                 Morrison & Foerster, Sullivan & Cromwell
                                                                                                           (special product counsel)
      Great-West                               300        Cleary Gottlieb Steen & Hamilton                 Simpson Thacher & Bartlett
      Citigroup Capital XV                   1,100        Skadden Arps Slate Meagher & Flom                Cleary Gottlieb Steen & Hamilton
      Dominion Resources                       500        McGuireWoods                                     Troutman Sanders, Sullivan & Cromwell

www.iflr.com                                                                                                              IFLR/November 2006 19

two deals by the credit card issuer including      bank’s product, there’ll be a commonly agreed          intensively for hybrid work, including on
the breakthrough $650 million in August.           structure,” he says.                                   price. At that point there will be an advantage
Cleary Gottlieb, which has advised Capital            Like all new instruments hybrids will               to those law firms with the most experience
One on all its major financings since 2001,        become commoditized – Buckholz predicts it             that can do the work most efficiently,” says
was issuer counsel.                                will take one to two years. In the process they        Morrison & Foerster’s James Tanenbaum,
   In March the National Association of            will lose some of their prestige and become less       counsel to Capital One on its hybrid.
Insurance Commissioners’ (NAIC) Securities         exciting to lawyers, who prefer to work on               For the time being, however, there are still
Valuation Office, which regulates the US           bespoke deals. Not that they will turn the work        plenty of challenges to overcome. Simpson
insurance industry, threw the market into          down, of course. The firms that have already           Thacher’s Andrew Keller, who advised on the
disarray by classifying Lehman’s Ecaps as          worked on the early hybrids will be hoping to          original Ecaps deal, says: “We have gone past
common equity rather than preferred stock.         turn that into a reliable income source. “As the       the stage of having to reinvent the wheel with
Despite dire warnings, however, deals              landscape becomes more predictable                     each deal, but the banks are still coming up
continued through the summer. Earlier this         investment banks will compete more                     with better mousetraps.”                  BM
autumn the NAIC released a proposed
definition and treatment of hybrids that has
been welcomed in the market and is expected        US STRUCTURED FINANCE
to be adopted at the NAIC’s winter meeting
in December.
   Although hybrids continue to be in vogue
as high profile and high value work, they have
so far had little practical impact on the law
firms working in the area. Hybrids are
                                                   Thank you Isda
substantially more labour intensive – and
higher fee earning – than vanilla structured
                                                   New templates have caused an explosion in synthetic CDOs
finance deals, and can take anything from a

month to more than a year to prepare. To be                           ho says trade groups aren’t          US structured finance
able to service this kind of deal firms need to                       worth the membership fees?
be able to deploy an interdisciplinary team of                        The International Swaps and          Recommended firms
capital markets, tax and bank regulatory                              Derivatives Association (Isda),      Tier 1
lawyers. But none of the firms IFLR spoke to       for one, has proved its value over the last 18           Cadwalader Wickersham & Taft
has so far set up a formal hybrids team,           months. By creating model documentation for              Mayer Brown Rowe & Maw
although they generally have a handful of          trading in credit default swaps (CDS) on asset-          Orrick Herrington & Sutcliffe
partners and associates who spend the bulk of      backed securities (ABS) it has sparked a gold rush       Sidley Austin
their time on such work. Sullivan &                in synthetic collateralized debt obligations             Skadden Arps Slate Meagher & Flom
Cromwell has given internal hybrids training       (CDOs).
                                                                                                           Tier 2
to its staff but, like other firms, does not          Rather than referencing a pool of physical
                                                                                                            McKee Nelson
appear to anticipate imminent hires to meet        assets such as loans and bonds, as with cash flow
                                                                                                            Thacher Proffitt & Wood
the demands.                                       CDOs, synthetics pull together a pool of CDS to
   That strategy could be under pressure if the    shift the credit risk of assets into the CDO            Tier 3
hybrids sector takes off as many expect it to in   without transferring the assets themselves. They         Cleary Gottlieb Steen & Hamilton
2007 now that the NAIC threat seems to be          offer greater flexibility than cash deals and have       Dewey Ballantine
resolved. Lawyers who work in the field say        been popular in Europe for several years,                Simpson Thacher & Bartlett
they do not anticipate any further regulatory      accounting for roughly 90% of the CDO                    Weil Gotshal & Manges
hiccups.                                           market.
   So what’s next in the evolution of hybrids?        Synthetics have been slower to take off in             The arcane world of credit default swaps and
According to Sullivan & Cromwell’s Robert          the US, where they make up only 9% of new              synthetic CDOs yields little information to the
Buckholz, who has advised on Stanley Works         issuance. In June and December of last year,           outside. Deals are private and difficult to
and Capital One among other deals, the most        however, Isda published templates for                  categorize, making keeping track of the market
important developments have already been           documenting trades of CDS on ABS. One                  difficult. It is therefore unclear how much work
made now that banks can achieve basket D.          applies to CDS on ABS intended for cash or             law firms are winning, and who is getting the
Although questions will arise about the            physical settlement; the other (which appears          most. Talking to lawyers reveals a long list of
drafting of replacement capital covenants,         in two versions) is for use with CDS on ABS            competitors that are active, including big-hitter
Buckholz predicts a rapid move towards             employing a pay-as-you-go (PAUG)                       securitization firms such as Sidley Austin, McKee
standardization. “Nine months from now if a        settlement policy. In June of this year, Isda          Nelson and Cadwalader Wickersham & Taft as
bank holding company wants to do a basket          went on to release a similar template for CDS          well as firms with strong corporate groups
D offering they won’t be trying to decide          on CDOs.                                               including Cleary Gottlieb Steen & Hamilton
whether to use this bank’s product or another         The templates were based on a prototype             and Schulte Roth & Zabel. It also includes UK
                                                   developed by a group of dealers and have proved        firms with New York offices, notably Freshfields,
                                                   to be extremely successful in removing barriers to     which has used CDO work to spearhead its US
                                                   trading. Doing so has attached a rocket to the US      structured finance practice. What all firms need,
                                                   synthetics sector, in part by promoting synthetic      however, is expertise on both derivatives and
“The banks are still                               ABS on CDOs that use the PAUG template, and
                                                   by enabling larger synthetic buckets in
                                                                                                          structured finance.
                                                                                                             So far the boom in synthetic CDO work has
coming up with                                     cash/synthetic hybrid CDOs.                            had little impact in terms of staffing on the
                                                      According to Dealogic, while in 2003 there          established US firms. Those looking to break
better mousetraps
Andrew Keller, Simpson Thacher &
                                         ”         were just five synthetic deals, last year there were
                                                   57, worth $14 billion. So far this year there have
                                                   been almost 100 deals, setting course to double
                                                                                                          into the market are taking on board new
                                                                                                          people, however. For example, Linklaters hired
                                                                                                          partner Adam Glass, who specializes in
Bartlett                                           last year’s total. With the CDS market worth           CDO work, from Sidley Austin in 2004 and
                                                   trillions of dollars, the scope for further growth     took on board Stan Renas from Cadwalader
                                                   in synthetic CDOs is vast.                             earlier this year.                           BM

20 IFLR/November 2006                                                                                                                          www.iflr.com

    Stock picking                                                                                              “Sarbanes-Oxley
                                                                                                               has led to a major
    How firms are reacting to the stampede of equity to Europe
                                                                                                               decline in New York

                he London Stock Exchange’s                cooperation between securities regulators in
                Alternative Investment Market             promoting market integrity. Issuers and              listings and SEC
                (Aim) has raised $19 billion in 65
                foreign listings this year. Freshfields
    says that more than half of its London listings
                                                          investors both have an interest in the integrity
                                                          of global markets, said Tafara, and the
                                                          regulatory race should be one to optimality
                                                                                                               Nick Eastwell, Linklaters
    in 2006 came from non-UK issuers. This is             rather than the bottom. He had detailed
    largely a result of a flight of capital from the      similar opinions in the cover story of
    US, driven by the expensive compliance                September’s IFLR, arguing that regulatory            an equity capital markets lawyer. “The role of
    requirements of the Sarbanes-Oxley Act (Sox).         standards around the world are converging            the lawyer is becoming more important as
    But how are US and UK law firms reacting to           towards Sox. At the time of writing, the             increased regulation and high profile corporate
    this boom in work?                                    London Stock Exchange is reported to be              failures have led to a more risk averse
       Firms began by looking for issuer                  reviewing Aim’s regulations and introducing a        environment,” he says.
    instructions, which are more attractive than          new regime next year.                                   Opportunities for firms to enter the equity
    nominated adviser (Nomad) work for brokers               And it seems the adage about the US               market are scarce. Lawyers say equity is the
    such as Collins Stewart and Peel Hunt. But the        sneezing and the rest of the world catching          most competitive market of all, more so than
    elite investment banks have also become               cold could no longer be true. Practitioners say      debt where the Eurobond market is sewn up by
    interested in bringing bigger deals to the            that the influence of the US is not as great as      the top UK firms, with the exception of high-
    alternative market, justifying international          before with China, Japan, the European Union         yield debt which remains a US product. “It’s
    firms accepting Nomad instructions. The top           and emerging markets becoming more                   difficult for new firms to break into the market
    banks are careful about the deals they act on,        independently viable. Lawyers see evidence of        without major investment,” says Eastwell.
    says one equity lawyer, and they are prepared to      this trend away from US market dependency            “The same firms that dominated the market 20
    pay higher fees. Also, while Aim is a big source      in the success of Aim. The New York Stock            years ago are still the top firms today.”
    of work for many law firms of different sizes,        Exchange is reported to have commissioned               Linklaters has over 500 lawyers in its global
    leading firms are finding that only the top Aim       consultants to answer why the exchange has           capital markets group while fellow magic
    work is worth their while.                            lost ground to Europe and London in                  circle firm Allen & Overy has over 200 capital
       US firms have suffered as their UK                 particular. “Most big deals include a Rule 144A      markets lawyers in London alone. But it is
    counterparts have prospered. The success of           tranche,” says Nick Eastwell, global head of         still not enough and firms are having
    London’s alternative market in attracting             capital markets at Linklaters. “But Sarbanes-        problems staffing deals, leading to brutal
    foreign issuers came at the expense of New            Oxley has led to a major decline in New York         hours for associates over the summer. Success
    York’s National Association of Securities             listings and SEC registrations.” Foreign             breeds its own challenges and lawyers say that
    Dealers (Nasdaq). Lawyers say that US                 companies need only be rated by one of the           busy markets can pose problems when
    authorities are aware of the need to review Sox,      ratings agencies to tap the US market through        management’s attention wanders from career
    while London knows it needs to tighten its            Rule 144A and the Section 4(2) exemption of          development. “While we rarely lose people to
    regime. Speaking at September’s Live from the         the US Securities Act, which allows qualified        our competitors, some associates are moving
    SEC event, Ethiopis Tafara, director at the           institutional buyers to participate in the           to banks that can offer an alternative
    Office of International Affairs at the SEC, said      primary and secondary 144A market.                   proposition in terms of lifestyle,” says Boyan
    that capital markets are now internationalized           Lawyers are interested to see what the            Wells, who stepped down as head of Allen &
    and oblivious to borders. Tafara, who prefaced        response from US firms will be to the success        Overy’s international capital markets group in
    his comments with a statement that his                of European capital markets in attracting            October following his appointment to the
    opinions were his own and not those of the            Chinese, Russian and other foreign issuers.          firm’s board. Wells thinks that law firms must
    Commission, said that investors still demand          Practitioners surveyed by IFLR have the              do more to strike the right sort of lifestyle
    protection and identified the need for greater        impression that the elite New York firms,            balance and examine opportunities in flexible
                                                          which do not have the spread of the big              working.
                                                          European firms, are not putting the same                It is difficult for practice leaders and

     “The investment                                      resources into global capital markets. Instead
                                                          many of these firms are focusing on their home
                                                          market. US firms are unlikely to change their
                                                                                                               managing partners to focus on career
                                                                                                               development during what equity lawyers term
                                                                                                               an explosion of business. Initial public
     banks have also                                      business models due to a relative lack of size       offerings (IPOs) are buoyant and the main
                                                          (compared to international European firms)           markets in Europe are characterized by the
     become interested                                    and, most importantly, concerns about                geographic diversification of issuers. Eastwell
                                                          profitability dilution. But there are a variety of   puts his firm’s regular appearance at the top of
     in bringing bigger                                   business models in operation at international        the various rankings for IPO instructions
                                                          US firms and European competitors are                down to the depth of the firm’s international
     deals to the                                         interested to see what firms like White & Case       network. He also cites the introduction of Sox
                                                          and Baker & McKenzie are doing in emerging           in the US as a helpful factor in driving foreign
     alternative market,                                  markets.                                             companies from the US to Europe. Linklaters
                                                             Over the past decade the European capital         is placed first in both Thomson Financial’s and
     justifying firms                                     markets have become deeper, broader, more            Bloomberg’s second quarter 2006 European
                                                          integrated and more innovative. Management           IPO manager advisers tables, both in terms of
     accepting Nomad                                      consulting firm McKinsey & Company
                                                          predicts the global capital stock could rise to
                                                                                                               deal volume and number of issues. According
                                                                                                               to data from both providers Linklaters has
     instructions               ”                         over $200 trillion by 2010 and Nick Eastwell
                                                          thinks there has never been a better time to be
                                                                                                               more than double the number of instructions
                                                                                                               of its nearest competitor.                  DA

www.iflr.com                                                                                                                   IFLR/November 2006 21
                                                                                                         CAPITAL MARKETS REVIEW

     Australia                                                                                                               months.
                                                                                                                                IPO activity in Australia has
    Kangaroo market looks to another record year                                                                             slowed between the first nine
                                                                                                                             months of 2005 and the same
    Debt                                    Equity                                   Structured finance                      period this year. The number of
    Recommended firms                       Recommended firms                        Recommended firms                       deals has fallen from 86 to 77
    Tier 1                                  Tier 1                                   Tier 1
                                                                                                                             with a corresponding fall in total
    Mallesons Stephen Jaques                 Allens Arthur Robinson                   Allens Arthur Robinson                 transaction value of $4.5 billion
                                             Blake Dawson Waldron                     Clayton Utz                            to $3.7 billion. The shortlist of
    Tier 2
                                             Freehills                                Mallesons Stephen Jaques               top tier firms in this sector
    Allens Arthur Robinson
    Blake Dawson Waldron                    Tier 2                                   Tier 2                                  comprises the same names that
    Clayton Utz                              Clayton Utz                              Blake Dawson Waldron                   made up the 2005 group: Allens
    Freehills                                Mallesons Stephen Jaques                 Freehills                              Arthur Robinson, Blake Dawson
    Tier 3                                  Tier 3                                   Tier 3
                                                                                                                             Waldron and Freehills.
                                                                                                                                Allens remains a favourite
    Baker & McKenzie                         Baker & McKenzie                         Henry Davis York
                                                                                                                             amongst investment banks and it
    Minter Ellison                           Minter Ellison                           Minter Ellison
                                                                                                                             dominated the initial public
    Bond issuance enjoyed healthy           billion. Fast forward to the same        offers an intimidating 17-strong        offerings (IPOs) in the first six
    growth this year in Australia and       period in 2006 and that volume           list of clients that have been          months of 2006. In this period
    the Kangaroo bond market (debt          has grown to 113 bonds issued at         advised in Kangaroo bond                Allens advised on 39% of the
    securities issued in Australia by       a combined $35 billion. The              transactions over the last 12           IPO market, according to
    foreign investors) showed no sign       bond business is booming and             months, ranging from Scottish           Bloomberg. This impressive
    of losing momentum – 2006 is            law firms are well placed to reap        Power to Morgan Stanley to              statistic was powered by Allens’
    expected to be another record           the rewards.                             Landesbank Baden Wurtemberg.            role as issuer’s counsel on the
    year. One area of new business is          Allens Arthur Robinson has               With high yield corporate            A$1.8 billion ($1.36 billion) IPO
    expected to be AAA-rated                dropped down to tier two of              bonds on the increase this year as      of explosive manufacturer Dyno
    supranational borrowers or              recommended debt market firms            well – from inactivity in 2005 to       Nobel in April this year. Freehills
    agencies in Europe, which have          as the dominance of Mallesons            four deals worth over $2 billion        had led the market last year in
    yet to invest in any numbers in         Stephen Jacques sees them patrol         in the first nine months of 2006        terms of deal size and volume
    the Kangaroo bond market.               the      first     tier     alone.       – the Australian debt market            while Blake Dawson Waldron
       In the first nine months of last     Unsurprisingly, Mallesons has            shows no sign of cooling off.           came second to Allens in terms of
    year 101 investment-grade               cemented its supremacy by                Mallesons’ reputation as the pre-       combined IPO transaction value,
    corporate bonds were issued, at a       gaining the upper hand in                eminent firm for bond issuance          providing advice on deals worth a
    value of slightly under $27             Kangaroo bond deals. The firm            augurs well for the firm’s next 12      total of $496 million.

     Brazil                                                                           Canada

    Brazilian IPOs boom                                                              Equity hits a capital plateau
    Recommended firms                                                                Recommended firms
                                            at an extraordinary rate banks                                                   same period in 2006. However the
    Tier 1                                                                           Tier 1
                                            across the world have been                                                       overall value of the deals has not
    Barbosa Müssnich & Aragão               scrambling to establish a foothold       Davies Ward Phillips & Vineberg         fallen as much, dropping from $4.9
    Machado Meyer Sendacz e                 in Brazil. A glance at the deals         Osler Hoskin & Harcourt                 billion to $4.5 billion. Similarly, the
    Opice – Advogados                                                                Stikeman Elliott
                                            taking place explains why. In                                                    total value of bonds of investment
    Mattos Filho Veiga Filho Marrey                                                  Torys
                                            February tier one firm Barbosa                                                   grade has dropped only slightly –
    Jr e Quiroga Advogados
                                            Müssnich & Aragão handled the            Tier 2                                  from just over $31 billion in 2005
    Pinheiro Neto Advogados
                                            IPO of construction company              Blake Cassels & Graydon                 to slightly under $30 billion this
    White & Case
                                            Gafisa, a transaction valued at $436     Goodmans                                year – despite a more marked
    Tier 2                                  million. July saw the biggest equity     McCarthy Tétrault                       decrease in the number of bonds
    Lefosse Advogados                       deal in Brazil’s history as CESP                                                 issued (143 to 95).
                                                                                     Tier 3
    Levy & Salomão Advogados                completed a $1.5 billion secondary                                                  Notable deals in 2006 included
                                                                                     Fasken Martineau DuMoulin
    Motta Fernandes Rocha                   offering while MMX Mineração e                                                   the C$600 million ($528
                                                                                     Ogilvy Renault
    Advogados                               Metálicos went public for $475                                                   million) IPO of the Tim Hortons
    Pinheiro Guimarães –                    million the same month. But it will      Canada experienced rapid and            coffee and donut chain. The
                                            take time before Brazilian equity is     impressive growth in its Maple          chain was advised by Davies Ward
    Souza Cescon Avedissian
                                            seen as a safe bet, particularly given   bond market in 2005 after lifting       Phillips & Vineberg, which has
    Barrieu e Flesch Advogados
                                            its reliance on         international    an anachronistic law limiting           risen into tier one of the IFLR
    Tozzini Freire Teixeira e Silva
                                            commodity prices, especially oil.        pension plans’ ability to invest in     recommended firms this year
                                               The equity markets are                foreign issuers. The overall capital    following a series of impressive
    Brazil has enjoyed a strong year as     dominated by a handful of legal          market appears to be stabilizing this   transactions and hires. More
    it leads the economic improvement       advisers. Machada Meyer Sendacz e        year as figures for bond issuance       recently, in June 2006, Torys
    seen across much of Latin America.      Opice led the way in 2006,               and initial public offerings (IPOs)     represented Royal Utilities
    The initial public offerings (IPO)      handling 16 equity offerings deals       have begun to plateau.                  Income Fund in a C$172.5
    market has boomed, with the value       at a total value of over $7 billion.        Opportunities for law firms          million IPO. Neither firm could
    of deals more than doubling from        Davis Polk & Wardwell, Shearman          within the equity market have           match the number of deals
    just under $1.8 billion in the first    & Sterling, and Clifford Chance          fallen somewhat this year as IPO        Stikeman Elliott provided advice
    nine months of 2005 to $4.2             top the list of international counsel,   deals tail off. The number of IPOs      on; the firm has been involved in
    billion in the same period this year.   each handling seven or eight             declined from 135 in the first nine     53 transactions in the first nine
        With its equity market growing      transactions this year.                  months of 2005 to just 59 in the        months of 2006.

www.iflr.com                                                                                                                     IFLR/November 2006 23

 Denmark                                                                         Finland

Equity offerings snapped up                                                     Covered and sovereign success
Recommended firms*                     also gearing up for a listing in 2007,   Recommended firms                        issue for Sampo in October was the
Tier 1                                 which promises to be the country’s       Tier 1                                   first jumbo covered bond in the
Gorrissen Federspiel                   largest ever IPO.                        Hannes Snellman                          region and the first Finnish covered
Kierkegaard                               Until these promises bear fruit,      Roschier Holmberg                        bond involving a transfer of the
Kromann Reumert                        investors are fighting over scraps –     White & Case                             underlying assets to the issuer
Tier 2                                 the TrygVesta offering was               Tier 2                                   (rather than the issuer originating
Bech-Bruun                             reportedly oversubscribed by 16          Castrén & Snellman                       the assets itself). It was also one of
Plesner Svane Grønborg                 times, and other IPOs in the             Merilampi Marttila Laitasalo             the few covered bonds to add
Tier 3
                                       jurisdiction have met with similar       Waselius & Wist                          structured finance techniques to a
                                       feeding frenzies.                        Tier 3
                                                                                                                         statute-based covered bond system.
                                          No such shortage on the debt                                                      The joint lead managers were
DLA Nordic                                                                      Borenius & Kemppinen
                                       side, however. Copenhagen has                                                     advised on Finnish law by Hannes
Jonas Bruun
                                       kept up with its neighbours with a       Equity in the Nordic region proved       Snellman, one of the top firms for
*This table reflects the banking and   several large deals including Jyske      extremely popular in 2006, with          capital markets, led by partner
finance capability of law firms,       Bank’s 4 billion MTN issue.              the few large initial public offerings   Henrik Mattson. Fellow top tier
including capital markets              TDC and Nordic Telephone                 heavily oversubscribed. The lack of      firm Roschier Holmberg advised
                                       Company also raised the bar on           IPOs, together with the compe-           the issuer, led by partner Dimitrios
The waters of the Danish equity        high-yield bond issues, with             titiveness of bond or bank issuance      Himonas. Although better known
market are starting to stir again.     offerings both in excess of 2            as a source of funding for Finnish       in M&A, Borenius & Kemppinen
October saw the IPO of insurance       billion.                                 companies, made secondary                remains a strong competitor in tier
company TrygVesta. At           838       Most of these deals have been         placements a more fertile source of      three, with Kaupthing Bank a key
million, it was Denmark’s biggest      picked up by Bech-Bruun,                 deals for bankers and their lawyers.     client.
flotation in a decade, and investors   Gorrissen Federspiel Kierkegaard,        These included two placings for             On        sovereign       issuance,
in the country are clamouring for      Plesner Svane Grønborg and               Sampo Housing Loan Bank.                 meanwhile, Finland had a
more. ISS, whose sale to private       Kromann Reumert. But a widening             Finland also led the way on           successful year typified by its 5
equity investors paved the way for     of the market can only be good           covered bond issuance in the             billion bond due 2017. The issue
the 13 billion leveraged buyout of     news for the four firms’ mid-market      Nordic region, finding two               was originally planned as a 4
TDC, is among targets being            competitors, including the rapidly       enthusiastic users of the product in     billion transaction, but an order
mooted for re-listing. Denmark’s       climbing finance team at DLA             Sampo and Aktia Real Estate              book of 9 billion allowed the deal
biggest energy company, Dong, is       Nordic.                                  Mortgage Bank. The 5 billion             to be increased by 1 billion.

                 A PROBLEM SHARED WITH US
                    IS A PROBLEM SOLVED.

                                              Legal problems in Finland or the Baltics?
                                                           Visit www.borenius.com

24 IFLR/November 2006                                                                                                                            www.iflr.com
                                                                                                        CAPITAL MARKETS REVIEW

     France                                                                                                                  for debt issuance. Gide stands to
                                                                                                                             benefit from the growing appetite
    Firms look forward to a securitized future                                                                               for sophisticated finance structures.
                                                                                                                             It houses a team with plenty of
    Equity                                Debt                                      Structured finance                       expertise in fonds communs de
    Recommended firms                     Recommended firms                         Recommended firms                        créances (FCCs), the standard
    Tier 1                                Tier 1                                    Tier 1
                                                                                                                             French securitization vehicle.
    Cleary Gottlieb Steen & Hamilton      Allen & Overy                             Freshfields Bruckhaus Deringer              Gide’s varied securitization work,
    Shearman & Sterling                   Gide Loyrette Nouel                       Gide Loyrette Nouel                      along with that of fellow top-tier
    Sullivan & Cromwell                   Linklaters                                                                         firm      Freshfields      Bruckhaus
                                                                                    Tier 2
    Tier 2                                Tier 2                                    Allen & Overy                            Deringer, shows the range of
    Freshfields Bruckhaus Deringer        Clifford Chance                           Clifford Chance                          possibilities in France’s structured
    Gide Loyrette Nouel                   Freshfields Bruckhaus Deringer            Linklaters                               finance market. This diversity has
    Linklaters                            Shearman & Sterling                       Shearman & Sterling                      long been held as one of the
    Skadden Arps Slate Meagher &
                                          Tier 3
                                                                                    Skadden Arps Slate Meagher &             jurisdiction’s     attractions    for
    Flom                                                                            Flom                                     investors. The trend is reflected by
                                          Jones Day
    Tier 3                                Latham & Watkins                          Tier 3                                   banks, which are taking up-front
    Allen & Overy                         Lovells                                   De Pardieu Brocas Maffei
                                                                                                                             arrangement fees for various
    Bredin Prat                           Orrick Rambaud Martel                     Jones Day                                structured        products       and
    Clifford Chance                       Skadden Arps Slate Meagher &              Latham & Watkins                         transferring their long-term
    Debevoise & Plimpton                  Flom                                      Lovells                                  holdings to investment funds, so
                                          White & Case                              Orrick Rambaud Martel                    effectively acting as middlemen.
                                                                                    White & Case                                Nevertheless, the country still
                                                                                                                             lags behind its neighbours for
    Large-scale privatization has         Cromwell. This was followed up by         kind to involve mass insurance           volume, accounting for less than
    underpinned France’s equity           IPOs in 2006 for Arkema, Legrand,         risks. The deal was another feather      3% of European securitization
    activity. November 2005 saw the       Aéroports de Paris and Züblin             in the cap for Gide Loyrette Nouel.      issuance in 2005. But the flexibility
    IPO of Electricité de France, which   Immobiliére France kept ECM               After the Axa notes, issued by FCC       of the FCC regime, combined with
    raised     6.35 billion for the       lawyers busy.                             Sparc, Gide followed up in 2006          the maturity of the legal market,
    company and showed Hervé                 On the debt side, the end of           with deals for FCC Minotaure             has brought a new optimism to the
    Letréguilly’s team at Shearman &      2005 had been characterized by            2004-1 and FCC Odysseus.                 country’s legal profession. If these
    Sterling competing on even terms      innovation. Axa’s triple-award-              The international firm topped         hopes are founded, the future of
    with Cleary Gottlieb Steen &          winning securitization broke new          the rankings this year for structured    French finance – once uncertain –
    Hamilton and Sullivan &               ground as the world’s first deal of its   finance and securitization, as well as   is securitized.

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         Events Calendar 2006/07
             15th-16th November 2006
             Asia Capital Markets Forum, Shangri-La, Hong Kong
             31st January – 1st February 2007
             IFLR Asia M&A Forum, Shangri-La, Hong Kong
             April 2007
             European Capital Markets Forum, Chancery Court Hotel, London
             May 2007
             US Capital Markets Forum, New York
             Register your interest and find out more at: www.legalmediagroup.com/events
             Or contact Pippa Martin on: +44 (0)20 7779 8614

        “Today saying the transaction is legal is not enough.
         That's the start but not the end of the enquiry.”
             Ed Greene, Citigroup

www.iflr.com                                                                                                                    IFLR/November 2006 25

 Germany                                                                                                                 has also been very involved in the
                                                                                                                         equity market this year, advising
                                                                                                                         Nuremburg Bio-Gate during an
Equity capital markets quadruple in a year                                                                               IPO that was eventually worth
                                                                                                                           16.6 million.
Debt                                      Equity                                 Structured finance
Recommended firms                         Recommended firms                      Recommended firms
                                                                                                                            Hengeler has maintained its
Tier 1                                    Tier 1                                 Tier 1
                                                                                                                         position as the market leader in
                                                                                                                         German debt work despite
Hengeler Mueller                          Hengeler Mueller                        Hengeler Mueller
                                                                                                                         strengthening competition from
Tier 2                                                                           Tier 2                                  the growing number of domestic
                                          Sullivan & Cromwell
Allen & Overy                                                                     Allen & Overy                          and international firms. In March
Clifford Chance                           Tier 2                                  Clifford Chance                        2006 the Federal Republic of
Freshfields Bruckhaus Deringer            Allen & Overy                           Freshfields Bruckhaus Deringer         Germany released its first ever
Linklaters                                Clifford Chance                                                                inflation-linked bond with a
                                                                                 Tier 2
                                          Freshfields Bruckhaus Deringer                                                 volume of 5.5 billion and a
Tier 3                                                                            Baker & McKenzie
                                          Shearman & Sterling                                                            term of 10 years; Hengeler was
Cleary Gottlieb Steen & Hamilton                                                  Linklaters
Lovells                                   Tier 3                                  Lovells                                the advisory firm to the
Shearman & Sterling                       Cleary Gottlieb Steen & Hamilton        White & Case                           government. Corporate clients
White & Case                              White & Case                                                                   include Bayer, Deutsche Bank,
                                                                                                                         Hypothekenbank and Eurohypo.
The statistics for the German            soared to 51.                           rediscovered its client base is         Hengeler remains, therefore, the
equity market in 2006 make                  Simultaneously,       though,        Hengeler Mueller. As the markets        sole member of tier one of IFLR’s
happy reading for law firms              investment grade corporate bond         have recovered business seems to        recommended firms for debt
handling equity brokerage in             issuance has declined both in           have flocked back to Hengeler, a        capital markets.
Europe’s largest economy. While          terms of volume and value. There        firm particularly badly hit by             A number of firms are taking
the overall value of initial public      were 347 transactions worth             past years of poor German               on an increasing volume of work
offering (IPO) deals nearly              $123.6 billion in the first three       market performance given its            in the debt field, though. Allen &
doubled from $3.3 billion in the         quarters of 2005 but those figures      lack of US advice for equity            Overy has moved into the second
first nine months of 2005 to $6          have fallen to $104 billion from        offerings abroad. This year             tier after a very successful year and
billion in the first nine months of      210 deals in the same period this       Hengeler was engaged in several,        a      number        of     complex
2006, the really impressive jump         year. Overall, however, the             diverse equity transactions,            transactions. Clifford Chance
was in the sheer volume of               economic outlook remains sunny          including a capital increase for        remains a key presence, too,
transactions. The $3.3 billion was       for German firms emerging from          chemical and pharmaceutical             advising Siemens this July on two
generated by just 12 IPOs while          a long downturn.                        company Bayer, a transaction            bond issues with a combined
the number of deals in 2006                 One firm that has clearly            worth 1.2 billion. Linklaters           value of around $5 billion.

 Italy                                                                           in the volume of deals but a rise in    the firm’s excellent record in the
                                                                                 the overall value of the transactions   equity market in 2006, especially
Strong IPO growth                                                                when comparing 2005 and 2006            regarding IPOs. This year Clifford
                                                                                 figures. The number of issuances        Chance has acted for Caboto and
Debt and equity                          Structured finance
                                                                                 fell from 84 to 78 while the overall    JP Morgan on the Intercos IPO,
Recommended firms                        Recommended firms
                                                                                 value of the deals rose from $41.7      advised Mediobanca and Goldman
Tier 1                                   Tier 1
                                                                                 billion to $54.6 billion. The           Sachs on the Ansaldo IPO,
Bonelli Erede Pappalardo                 Bonelli Erede Pappalardo                number of high yield bonds issued       represented Mediobanca and
Studio Legale                            Studio Legale
                                                                                 in the first nine months of 2006 is     Morgan Stanley on the Marazzi
Clifford Chance Studio Legale            Clifford Chance Studio Legale
                                                                                 two greater than the same period        Group IPO, advised the issuers on
Tier 2                                   Tier 2                                  last year (five as opposed to three)    the Api and Nice IPOs, and acted
Allen & Overy                            Allen & Overy                           while the combined value of the         for UBM and JP Morgan as global
Chiomenti Studio Legale                  Chiomenti Studio Legale                 deals has soared from $718 million      coordinators on the Elica IPO.
Freshfields Bruckhaus                    Freshfields Bruckhaus                   to $3.7 billion.                           It is activity of this intensity that
Deringer                                 Deringer                                   The capital market in Italy (both    has propelled the firm into the top
Gianni Origoni Grippo &                  Gianni Origoni Grippo &                 in debt and in equity) is a fiercely    tier this year. However it is Bonelli
Partners                                 Partners                                competitive one for law firms. This     that dominated the debt capital
                                         Simmons & Simmons                       year Bonelli Erede Pappalardo           markets in 2006. The firm advised
Tier 3
Cleary Gottlieb Steen &                                                          Studio Legale has preserved its tier    the EBRD on three domestic bond
Hamilton                                                                         one status while Clifford Chance        issues while Andrea Novarese (a
D’Urso Munari Gatti Studio                                                       has swapped places with Gianni          leading lawyer at the firm) acted for
Legale Associato                                                                 Origoni Grippo & Partners as the        Citibank and BNP Paribas on 1
Latham & Watkins                                                                 UK firm moves up to the top tier.       billion-worth of senior notes issued
NCTM                                                                                This year Bonelli worked on the      by Fiat. Novarese has also advised
                                                                                 Italian scooter manufacturer            Caboto, Deutsche Bank and
The number and total value of            continued growth in this area has       Piaggio’s 315.4 million IPO as          Lehman Brothers on the 150
initial public offerings (IPOs) in the   confounded gloomy predictions in        well as acting for Famiglia Moratti     million issue of senior notes by
Italian capital market has shown         the middle of the year about a          on the Saras IPO. Clifford Chance,      Piaggio Finance. Comparably
strong growth between 2005 and           natural slow down in European           meanwhile, provided advice to the       dominant performances by Bonelli,
2006. The first nine months of last      IPO activity after a heady five years   Italian listed banking group BPI on     in debt, and Clifford Chance, in
year heralded nine deals worth a         of activity.                            its rights issue to existing            equity, see the two firms
total of $1.8 billion, figures which        Investment-grade       corporate     shareholders and convertible note       unaccompanied in the top tier in a
rose to 15 and $4.8 billion in the       bond issuance has remained              holders amounting to           719.4    stubbornly strong Italian capital
same period this year. The               reasonably steady, with a small fall    million. This deal forms a part of      market.

26 IFLR/November 2006                                                                                                                             www.iflr.com
                                                                                                      CAPITAL MARKETS REVIEW

     Japan                                                                        holding steady at around the 150        where more recent waves have
                                                                                  mark from last year to this.            been made. Japanese high yield is
    A volatile market                                                                Impressive equity market work
                                                                                  has been conducted by Anderson
                                                                                                                          offering distracting returns and
                                                                                                                          promises to become an area of
    Debt and equity                       Structured finance                      Mori & Tomotsune. The firm              intense activity over the next year.
    Recommended firms                     Recommended firms                       advised on the global IPO of            On October 17 2006 SoftBank
    Tier 1                                Tier 1
                                                                                  Lotte Shopping in February of           offered 500 million of 7.75%
    Anderson Mori & Tomotsune             Anderson Mori & Tomotsune               this year, a deal worth $3.5 billion    senior notes due in 2013.
    Linklaters                            Mori Hamada & Matsumoto                 including an $800 million               Deutsche Bank, represented by
    Mori Hamada & Matsumoto               Nagashima Ohno &                        offering of global depositary           White & Case, was the sole initial
    Nagashima Ohno &                      Tsunematsu
                                                                                  receipts. Linklaters has moved          purchaser in what is one of the
    Tsunematsu                            Nishimura & Partners
                                                                                  into tier one, joining last year’s      highest-ever high yield offerings
    Tier 2                                Tier 2                                  incumbents Anderson, Mori               by an Asian firm. Issuers are
    Davis Polk & Wardwell                 Asahi Koma Law Offices                  Hamada & Matsumoto and                  becoming happier to enter the
    Nishimura & Partners                  Atsumi & Partners                       Nagashima Ohno & Tsunematsu.            high yield market in Japan and
    Sullivan & Cromwell                   Clifford Chance                            Dealogic statistics show the         the investors exist to make it
                                          Linklaters                              number and value of both                worthwhile.
    Tier 3
    Allen & Overy                         Tier 3                                  investment grade and high yield            The top tier firms in the
    Clifford Chance                       Allen & Overy                           bond issuances declining slightly       Japanese capital market will no
    Freshfields Bruckhaus                 Baker & McKenzie GJBJ Tokyo             from the first nine months of           doubt be keeping a close eye on
    Deringer                              Aoyama Aoki Law Office                  2005 to the first nine months this      the growing popularity of the
    Shearman & Sterling                   Freshfields Bruckhaus                   year. Numbers of investment             high yield debt market – an area
                                          Deringer                                grade corporate bonds have fallen       that up to now had hardly been
                                                                                  from 314 to 273, prompting a            relevant. Linklaters has propelled
    Growing IPO activity over the         a good number of high value deals       slump in total value of the deals       itself into tier one with a good
    past year in contrast to declining    in 2006, improving steadily on          from $86 billion to $57 billion.        year on the debt side. Anderson
    figures for bond issuance suggests    the already healthy 2005 figures.       Similarly, high yield bond              has also secured its 2005 tier one
    a potentially unbalanced capital      Last year, in the first nine months,    issuance is shown to have dropped       status for another 12 months with
    market in Japan’s recovering          there were 120 IPOs worth $6.7          from 23 to 19 deals between 2005        an impressive performance in the
    economy. But volatility has had       billion. In the same period this        and 2006; a combined value of           debt capital markets. The firm
    one benefit – a surge in the          year there have been 144 deals          $3.9 billion has fallen to $2.2         advised Fuji Photo Film on its
    popularity of high yield bond         worth a striking $10.4 billion.         billion.                                issue of ¥200 billion-worth ($1.7
    issuance.                             Further       offerings       remain       This does not tell the full story,   billion) of bonds in March this
       Japan’s equity market produced     numerous and high earning,              however. It is the debt market          year.

     Mexico                                                                        Netherlands

    Greater transparency                                                          High yield doubles
    Recommended firms                                                             Recommended firms
                                             Naturally, the figures for 2006                                              comparing January to September
    Tier 1                                                                        Tier 1
                                          are inflated by the privatization of                                            in 2006 to the same months of
    Galicia y Robles SC                   Grupo Aeroportuario del Pacifico        Allen & Overy                           2005, deal value has increased by
    Mijares Angoitia Cortés y             (GAP) in March. This IPO of the         Clifford Chance                         almost five times. The one IPO in
    Fuentes SC                                                                    De Brauw Blackstone
                                          Mexican airport operator was the                                                2005 was valued at $692 million.
    Ritch Mueller SC                                                              Westbroek
                                          largest from Latin America since                                                One year on and there were six
    White & Case
                                          the Brazilian listing of Petrobas six   Tier 2                                  IPOs with a total value of $3.4
    Tier 2                                years ago. On the GAP deal,             Linklaters                              billion. Similar to high yield
    Creel García-Cuéllar y                Cleary Gottlieb Steen & Hamilton        NautaDutilh                             corporate bonds, it can be seen
    Müggenburg SC                         and local counsel Ritch Mueller         Stibbe                                  that the average deal value has
    González Calvillo SC                  represented        the      Mexican                                             fallen, but the market should
    Holland & Knight – Gallastegui y      government in its sale of 85% of        The Netherlands has seen                remain in buoyant mood.
    Lozano                                the airport operator. On the other      substantial growth in two                  Observers have noted that
    Jáuregui Navarrete y Nader SC         side, Shearman & Sterling acted         particular areas in 2006, one on        equity capital markets came out of
    Kuri Breña Sánchez Ugarte             for the underwriters Credit Suisse      the debt side and one in equity.        a stale period with the
    Corcuera y Aznar
                                          and Accival. Assisting the firm was     Firstly, high yield corporate bonds     enforcement of the Prospectus
    Martínez Algaba Estrella de
                                          Mexican counsel Creel García-           have doubled in deal value. The         Directive in July 2005. The first
    Haro y Galván-Duque
                                          Cuéllar y Müggenburg. The IPO           first nine months of the year saw       major IPO after this arrived in
    Santamarina y Steta SC
                                          raised over $1 billion.                 $3.66 billion-worth of activity         November of the same year in the
    In 2006, the Mexican initial public      This takes up a huge proportion      across eight deals. During the          form of Endemol. NautaDutilh
    offering (IPO) market has grown       of the overall IPO figures for          same period of 2005, a mere three       played a large role in advising
    by over 21 times. January to          Mexico in 2006. However, such a         deals totalled $1.8 billion. Despite    Endemol in this deal and as a
    September saw $1.232 billion of       large transaction proves that the       the fact that the average deal value    result, helped create a wave that
    offerings compared to only $58        capabilities to cope with further       has fallen by a third, the market       the IPO market has been riding
    million in the same months of         investment are there. It is believed    should be pleased that there are        ever since. Most notably, Allen &
    2005, according to Dealogic. Such     that the GAP IPO will strengthen        more deals, resulting in more           Overy benefited from this in May
    results go a long way to proving      the belief that foreign investment      money to be made.                       2006 by successfully acting as
    predictions      that    improved     will bolster the Mexican equity            The second area of considerable      underwriter’s counsel in the SNS
    corporate governance would            capital markets in the coming           growth is the initial public            Reaal IPO that raised 1.3 billion
    increase foreign investment.          years.                                  offering (IPO) arena. Again, when       in return for a 30% shareholding.

www.iflr.com                                                                                                                  IFLR/November 2006 27

 Poland                                                                       Republic of Ireland

A rather quiet year                                                          Disappointing results
Recommended firms                     these, by Famur, raised $91.2          Recommended firms                         was one of only six countries to
Tier 1                                million and most of the remainder      Tier 1                                    fully implement the EU’s
Allen & Overy                         less than $20 million each. Debt       A&L Goodbody                              Prospectus Directive on time in
Baker & McKenzie Grszczynski I        issuance has also struggled, falling   Arthur Cox                                July 2005. A few months earlier
Wspolnicy Attorneys at Law            from a total value of $11.2 billion    McCann FitzGerald                         the Irish Stock Exchange had
Weil Gotshal & Manges                 in January to September 2005 to                                                  launched its Irish Enterprise
                                                                             Tier 2
Tier 2                                $3.8 billion this year.                Matheson Ormsby Prentice                  Exchange (IEX) market for small
Clifford Chance Janicka                  The legal market, meanwhile,        William Fry                               and mid-sized companies in an
Namiotkiewicz i wspolnicy             remains stable and dominated by a                                                effort to compete with London’s
spolka komandytowa                    combination of UK and US firms.        Ireland may still be the Celtic Tiger     highly successful Aim market.
Dewey Ballantine Grzesiak             Allen & Overy, Weil Gotshal &          but its capital markets have had a           So far more than 20 companies
Linklaters                            Manges and Baker & McKenzie            mixed ride in 2006. Economic              have joined the IEX, but of those
White & Case W Danilowicz W           stood out as top tier firms for        growth is expected to be around           companies that went public in the
Jurcewicz I Wspolnicy                 capital markets work.                  5% both this year and in 2007, but        year to September three dual
                                         Firms have managed to carve         securities issuance has been up in        listed on Aim and in Dublin, one
There has been little cheer in the    out a few interesting deals. Baker     some areas, down in others and            listed solely on Aim and one dual
Polish capital markets this year.     & McKenzie advised AIG on a            static in still others.                   listed on the London Stock
Although inflation has been           securitization of non-performing          According to figures from              Exchange and Irish Stock
brought under control, the country    loans for Ultimo Group. Weil           Dealogic, there was no growth in          Exchange. The latter was the big
continues to face stiff economic      Gotshal was Polish counsel to          the number of initial public              fish of the Irish equity market this
challenges and its markets have       Credit Suisse on the 375 million       offerings (IPOs) and secondary            year, Aer Lingus. The airline
reflected that with a dearth of new   ($470 million) floating rate note      offerings by Irish issuers in the first   raised $940 million with its IPO
offerings.                            offering by French company             nine months of 2006 compared to           in September, for which its Irish
   In the first nine months of 2005   Belvédère, which were secured          that period last year. Both periods       counsel was Arthur Cox. William
26 Polish companies launched          against Polish assets. And Clifford    saw 13 follow-ons. Six IPOs               Fry acted for the Irish government
IPOs, raising a total of $1.85        Chance acted for the arrangers on      launched in quarters one to three         as selling shareholder and
billion, according to Dealogic.       a     150 million offering of          of 2005 but only five had done so         McCann Fitzgerald represented
Over the same period this year        revenue bonds for Bydgoszcz’s          by the end of September 2006.             the underwriters AIB, UBS,
only nine companies did so, raising   municipal water company,                  These results are particularly         Goldman Sachs and Merrion
just $205 million. The largest of     MWiK.                                  disappointing given that Ireland          Stockbrokers.

 Russia                                                                      that a stock bubble is forming.           spring have helped bring the
                                                                                The standout deal of 2006 has          technology onshore and have
Looking abroad                                                               been Rosneft’s IPO. The $10.6             given a boost to those who
                                                                             billion offering was the largest of       believe it will be an important
Debt                                  Equity
                                                                             the year to date, although it was         tool in serving the capital
Recommended firms                     Recommended firms
                                                                             surpassed last month by ICBC’s            requirements of a rapidly
Tier 1                                Tier 1
                                                                             deal out of China. The oil                expanding banking industry.
CGS&H Limited Liability               CGS&H Limited Liability                company chose to list its shares          Among        these     innovative
Company                               Company
                                                                             on the London Stock Exchange              transactions       was   Morgan
Linklaters                            Latham & Watkins
                                                                             as well as in Moscow. For its legal       Stanley’s Red Arrow International
Tier 2                                                                       adviser it chose Cleary Gottlieb          Leasing, the first Russian
                                      Skadden Arps Slate Meagher
Allen & Overy Legal Services                                                 Steen & Hamilton, which gave              securitization backed by a
                                      & Flom
Baker & McKenzie                                                             English, US and Russian law               portfolio of lease receivables.
Clifford Chance                       Tier 2                                 advice. Linklaters covered the            Linklaters acted for Morgan
Skadden Arps Slate Meagher            Clifford Chance                        three bases for the underwriters.         Stanley as lead manager, while
& Flom                                Debevoise & Plimpton                      The second largest Russian             Baker & McKenzie advised the
White & Case                          Freshfields Bruckhaus                  IPO up to the end of September            lease originators.
                                      Deringer                               was from Comstar, which
                                      LeBoeuf Lamb Greene &                  retained Latham & Watkins and
                                      MacRae                                 Liniya Prava. Linklaters was               IFLR rankings
                                                                             counsel to the banks. CTC Media
Like many of its richest and most     Prava, is making a name for itself     took the Nasdaq route, raising             The law firm rankings included
glamorous citizens, Russia’s          for both debt and equity.              $380 million in the process and            in this Review are abridged
bigger companies continue to be          In volume terms, the Russian        using the services of WilmerHale           versions of the tables in IFLR's
attracted to foreign markets. Of      IPO market has fallen off slightly     and Cleary Gottlieb in London.             annual guide, the IFLR1000,
the five largest IPOs by Russian      from last year, but in value terms     Krasnodar Magnit, turned to                which is published every
issuers in the first nine months of   it is surging ahead. Ten flotations    Freshfields Bruckhaus Deringer             October. To see the full
2006, three were dual listed in       raised a total of $4.3 billion         for its $368 million Moscow-only           rankings, visit IFLR1000.com.
Moscow and London and                 between January and September          listing with a Regulation S                A CD-ROM of the full guide will
another listed solely on Nasdaq.      2005, according to Dealogic,           portion.                                   be sent out to IFLR
Similarly, English and US firms       while over the same period in             Securitization has played a             subscribers with the January
tend to dominate both local and       2006 eight listings generated          minor role in the development of           edition of the magazine.
international        legal  advice    roughly $13 billion. This rapid        the Russian capital markets, but
although one local firm, Liniya       price ascent has some worried          some groundbreaking deals this

28 IFLR/November 2006                                                                                                                        www.iflr.com
                                                                                                      CAPITAL MARKETS REVIEW

     Singapore                                                                       The Singaporean legal market        value of investment grade
                                                                                  is led by Allen & Gledhill.            corporate      bond      issuances.
    On the road to recovery                                                       Capital markets are a key practice
                                                                                  area for the firm and it has been
                                                                                                                         Healthy figures for the first nine
                                                                                                                         months of 2005 showed 21 deals
    Domestic law firms                    Foreign law firms
                                                                                  busy in the equity market in           valued at $4.3 billion. These
    Recommended firms                     Recommended firms
                                                                                  2006. Notable work included            numbers were improved upon in
    Tier 1                                Tier 1
                                                                                  advising on the IPO of the Thai        the same period in 2006, which
    Allen & Gledhill                      Clifford Chance Wong
                                                                                  Beverage Company, a deal which         boasted 27 deals worth $4.5
    WongPartnership                       Linklaters Allen & Gledhill
                                                                                  raised $863 million in May this        billion.
    Tier 2                                Tier 2                                  year. Allen & Gledhill is joined in       The fragmented nature of
    Rajah & Tann                          Allen & Overy Shook Lin & Bok           tier one of local firms by             Asia’s capital markets has long
    Shook Lin & Bok                       Latham & Watkins                        WongPartnership, another firm          been identified as a hindrance to
    Stamford Law Corporation
                                          Tier 3                                  that excels in capital markets         investment. It has, therefore,
    Tier 3                                Herbert Smith
                                                                                  work.        Most          recently    been the focus of public and
    Arfat Selvam Alliance                 Lovells Lee & Lee
                                                                                  WongPartnership acted for the          private initiatives to improve the
    Colin Ng & Partners                   Milbank Tweed Hadley                    luxury hotel and resort company        performance of the debt market
    Drew & Napier                         & McCloy                                Banyan Tree in its IPO that raised     and alleviate Asian companies’
                                          Shearman & Sterling                     S$424 million ($269 million).          dependence on banks for
                                                                                     The top tier of foreign firms is    financing. This has resulted in
    Singapore, like a number of Asian     enjoyed such a sustained                occupied by two joint law              plenty of work for law firms in
    economies, has been recovering        development between 2005 and            ventures.       WongPartnership        bond issuance deals.
    steadily after the disasters of the   2006.                                   enjoys a relationship with                Allen & Gledhill and
    previous decade. Governmental            Twenty-three initial public          Clifford Chance called Clifford        WongPartnership again dominate
    schemes directed at improving         offerings (IPOs) in the first nine      Chance Wong, while the other           the scene. Earlier this year,
    the performance of the debt           months of 2005 has become 14            tier one firm is Linklaters Allen      WongPartnership acted for K-
    market have dragged up                in the same period this year, with      & Geldhill.                            Reit Asia as the originator on the
    corporate bond issuance. The          the cumulative value of IPO                Regarding the debt market, the      company’s first commercial
    debt market has been the subject      transactions falling from $1.4          number of high yield bond              mortgage-backed securitization
    of a great deal of attention from     billion to just under $1.3 billion.     issuances has fallen from one,         (CMBS)          involving      the
    the government and the financial      While economists will be happy          valued at $150 million, in             establishment of a $1.9 billion
    industry in Singapore, and it is      that the values have remained           January-September 2005 to none         multi-currency secured MTN
    here that steady growth in the        similar, the deals available for law    in 2006. The positive movement         programme and the issue of $121
    volume and value of deals can be      firm consultancy have fallen by         in the Singaporean capital market      million secured floating-rate
    seen. The equity market has not       39%.                                    is to be found in the number and       notes.

     South Africa                                                                  Spain

    Major law firm merger                                                         Resurgent equity
    Recommended firms                                                             Recommended firms
                                          The same period this year has seen                                             require     one     underwriting
    Tier 1                                                                        Tier 1
                                          a modest development to two                                                    agreement (typically governed by
    Bowman Gilfillan                      IPOs valued at a combined $143          Uría Menéndez                          New York or English law) and
    Deneys Reitz                          million. Investment grade bonds                                                avoid protocolos de aseguramiento
                                                                                  Tier 2
    Edward Nathan Sonnenbergs
                                          have risen over the same periods in     Clifford Chance                        and other elements of Spanish
    Webber Wentzel Bowens
                                          terms of both number and value:         Freshfields Bruckhaus Deringer         law.
                                          from three to five and from $1.2        Garrigues                                 The Parquesol deal, which
    Tier 2                                billion to $1.7 billion respectively.   Linklaters                             faced initial troubles from
    Brink Cohen Le Roux                      The South African legal              Ramón & Cajal                          investors,     saw    work     for
    Cliffe Dekker                         landscape was recently altered                                                 Linklaters, Davis Polk &
    Jowell Glyn & Marais                  permanently after the merger            The past year saw a strong return      Wardwell        and     Garrigues.
                                          between tier one firm Edward            for the Spanish initial public         Linklaters advised the lead
    Like a number of other emerging       Nathan and tier three firm              offering (IPO) market. The first       managers, led by UBS, while
    markets South Africa has had a        Sonnenberg Hoffmann Galombik            nine months saw $3.1 billion of        Garrigues and Davis Polk were
    successful year. Never likely to      was approved. Having only been          offerings, compared to only $187       Spanish and US advisors to the
    match the massive growth seen in      practicing as Edward Nathan             million the previous year. The         company respectively.
    some areas of Latin America,          Sonnenbergs since October 1             first half of 2006 was the busiest        Linklaters and Davis Polk were
    South Africa has nevertheless         2006, the full implications are yet     period for the market since 1999.      also involved with the recent IPO
    enjoyed healthy development in        to be judged but undoubtedly the           One of the strongest trends of      of BME, the holding company
    the value of its IPO transactions     new firm will be a powerful one.        the year was initial share offerings   for the Spanish stock exchanges,
    and growing investment grade             Edward Nathan was already a          sold only to institutional             which at 857 million is the
    corporate bond issuance. This has     major force in the debt market and      investors. The first such deals        largest so far in 2006. Uría &
    been a remarkably good year for       it had become increasingly active       were for real estate company           Menéndez, the preeminent law
    emerging markets worldwide and        on the equity side in the year          Parquesol in May and mobile            firm for capital markets in Spain,
    those involved with the South         preceding         the        merger.    provider LaNetro Zed (which            advised the issuer on Spanish law,
    African capital market will hope      Securitization was Sonnenbergs’         was registered with the Spanish        while Davis Polk & Wardwell
    for more of the same in 2007.         speciality as the firm had a strong     regulator in July but did not          provided US law advice to the
       The opening nine months of         relationship with Standard Bank.        complete). These IPOs have a           issuer and Linklaters worked on
    2005 yielded a single IPO             The unification of these firms will     greater degree of flexibility in       the     deal      advising     the
    transaction valued at $15 million.    be a daunting prospect.                 their documentation as they only       underwriters.

www.iflr.com                                                                                                                IFLR/November 2006 29

 South Korea                                                                as great an impact as may be           this year Kim & Chang acted as
                                                                            imagined.                              issuer’s counsel on Lotte
A strong domestic market                                                       Indeed,      companies      have
                                                                            continued to list in South Korea:
                                                                                                                   Shopping’s $3.54 billion IPO,
                                                                                                                   the largest in Korean history.
Domestic law firms                     Foreign law firms
                                                                            the 47 initial public offerings           The final member of tier one for
Recommended firms                      Recommended firms
                                                                            (IPOs) recorded in the first nine      the South Korean capital market is
Tier 1                                 Tier 1
                                                                            months of 2005 only fell by one        Woo Yun Kang Jeong & Han.
Kim & Chang                            Cleary Gottlieb Steen &
                                                                            in the same period this year. The      Despite being smaller than its top
Shin & Kim                             Hamilton
                                                                            total value of those deals, though,    tier compatriots Woo Yun has
Woo Yun Kang Jeong & Han               Linklaters
                                                                            has rocketed from last year to         enjoyed considerable success in the
                                       Simpson Thacher & Bartlett
Tier 2                                                                      this. Forty-seven transactions         equity market. The firm advised
Bae Kim & Lee                          Tier 2                               were worth $1.3 billion in 2005;       the underwriters on the Lotte
Lee & Ko                               Clifford Chance                      the 46 seen this year had a total      Shopping IPO that Kim & Chang
                                       Davis Polk & Wardwell                value of $5.5 billion.                 was also involved with. A month
Tier 3
Horizon Law Firm                       Tier 3                                  High yield corporate bond           later Woo Yun was impressing
Hwang Mok & Park                       Allen & Overy                        issuance has suffered in 2006          again when it helped Merrill
Kim Chang & Lee                        Milbank Tweed Hadley &               when compared with the same            Lynch arrange the asset-backed
Kim Choi & Lim                         McCloy                               period in 2005. The number of          securitization and leaseback of SK
Yoon Yang Kim Shin & Yu                Paul Hastings Janofsky &             deals has fallen from 295 to 153       Building      to    finance     SK
                                       Walker                               with a corresponding decline in        Corporation’s acquisition of
                                       Sidley Austin                        total deal value from $14.9            Inchon Oil Refinery.
                                       Skadden Arps Slate Meagher &         billion     to    $8.9      billion.      In May 2006 Woo Yun also
                                       Flom                                 Investment grade issuance,             advised the underwriters to
                                       White & Case                         however, has grown from 205            GMarkets $139 million IPO on
                                                                            deals valued at $18.7 billion in       Nasdaq. As the first Korean retail
As political unrest hits the region,   figures from 2005 to 2006. The       2005 to 253 worth $21.6 billion        company to list on the exchange,
South Korea can at least reflect       prospect of war in the region will   this year. This has provided a         this high profile deal added to
on a successful year of                inevitably make foreign investors    good deal of work for law firms in     Woo Yun’s impressive record of
performances in its capital            wary but South Korean economic       the South Korean debt market.          work this year. Deals such as
market. While the full economic        success has been founded, in any        The leading firms in the capital    these plus the continued
impact on South Korea of North         case, on domestic efforts. A         market are tier one residents Kim      dominance of Kim & Chang and
Korean rogue diplomacy remains         decline in the appeal of South       & Chang and Shin & Kim, both           Shin & Kim means that the three
to be seen, both the equity and        Korea to foreign investors has       of which are well respected in         top tier firms this year are the
debt markets show impressive           not, and probably will not, have     equity and debt markets. Earlier       same as in 2005.

                              H ORIZON L AW G ROUP

           Investing in Korea involves a myriad of issues relating to Korean laws, regulations, filings,
           reportings, deal structure, risk analysis, tax benefits and consequences, corporate governance,
           enforceability, indemnification, and exit strategy. Horizon Law Group specializes in advising
           foreign companies to sort through the various issues and do so in a professional and cost
           effective manner.

           Horizon Law Group is a leading full-service Korean law firm well known locally and
           internationally as it has been involved in major transactions and litigious matters. We were also
           recognized by international legal organizations for significant transactions and dispute
                                                              Practice Areas

              •     Mergers & Acquisition                                    •     Insurance
              •     Finance & Banking                                        •     Taxation
              •     Capital Markets                                          •     Labor
              •     Corporate & Commercial                                   •     Litigation & Arbitration
              •     Bankruptcy                                               •     Anti-Trust & Competition
              •     Information Technology                                   •     Real Estate & Construction
              •     Intellectual Property                                    •     Securities
              •     Environment                                              •     Maritime
                  The Korea Chamber of Commerce & Industry Bldg. 11th Fl., 45 Namdaemunro, 4-ga Jung-gu Seoul 100-743 Korea
                      Tel: 82 2 6050 1600 Fax: 82 2 6050 1700 Web site: www.horizonlaw.com Email: master@horizonlaw.com

30 IFLR/November 2006                                                                                                                   www.iflr.com
                                                                                                            CAPITAL MARKETS REVIEW

     Sweden                                                                              Switzerland

    Covered bond uncertainty                                                            Steady as she goes
    Recommended firms                        at it. Capital markets leader              Recommended firms                      value of corporate bonds make
    Tier 1                                   Mannheimer Swartling advised on            Tier 1                                 similar reading. High yield bonds
    Advokatfirman Vinge                      both the transactions, for the issuer       Bär & Karrer                          slumped from three issuances
    Mannheimer Swartling                     and Standard & Poor’s respectively.         Homburger                             worth $1.1 billion in the opening
                                             The firm also advised Nordax                Lenz & Staehelin                      nine months last year to none at all
    Tier 2
                                             Finans on the first consumer loan           Niederer Kraft & Frey                 in the same period in 2006.
    Advokatfirman Cederquist
    Gernandt & Danielsson                    securitization in the Nordic region.       Tier 2                                 Investment grade corporate bonds,
    Linklaters                               Key rival Advokatfirman Vinge had           Baker & McKenzie                      however, remained roughly steady:
    Setterwalls Advokatbyrå                  a similarly strong year in the capital      Nobel & Hug                           39 last year became 37 in 2006.
    White & Case Advokat                     markets, gaining an advantage from          Pestalozzi Lachenal Patry             The combined values of these
                                             the hiring of partner Göran                 Schellenberg Wittmer                  bond issuances fell slightly, from
    Much of the innovation in the            Nyström from Mannheimer.                    Walder Wyss & Partners                $8.8 billion to $8.4 billion.
    Nordic region’s capital markets in          Elsewhere, the growth in                 Wenger & Vieli                           This year tier one is made up of
    2006 surrounded new covered              private equity in Sweden was                                                      the same firms as 2005, namely:
    bond legislation. Although Finland       evident from the Skr40 billion             The Swiss capital market               Bär & Karrer, Homburger, Lenz &
    and Iceland led the way, Sweden          ($5.4 billion) buyout of medical           performed steadily in 2006. Small      Staelhelin and Niederer Kraft &
    wasn’t far behind, seeing two            technology company Gambro by               declines have characterized the        Frey. Notable deals in 2006 include
    covered bonds issued in quick            EQT and Investor, the largest              figures for initial public offerings   Bär & Karrer advising software
    succession, by Nordea Hypotek            peer-to-peer transaction ever in           (IPOs), high yield bonds and           company Temenos in March on a
    and the Swedish Covered Bond             the country. This had two effects          investment grade bonds, but there      secondary offering and convertible
    Corporation in mid-2006.                 on the corporate bond market:              have been no marked falls.             bond worth SFr2.25 billion ($1.8
       However, some bankers feel the        one, bondholders began to call                Law firms’ equity deals took a      billion). Homburger has been
    initial surge of issues may be a false   more strongly for change of                small hit as the volume of IPOs        involved in its fair share of equity
    dawn, the difficulty being that          control protection; and two,               slipped from six in the first nine     work recently: in May 2006 the
    Swedish banks already have a very        treasurers        and        finance       months of 2005 to five in the same     practice was involved in two
    active and liquid domestic debt          departments began to focus on              period this year. The combined         offerings, advising Holcim through
    market in Krone. Any euro-               changing their capital structure,          value of the IPOs in each period       the offering of $1.3 billion of
    denominated issue has to have            switching to greater leverage with         predictably fell, from $1.3 billion    shares and BNP Paribas, Credit
    compelling economics before any          the hope of deterring predatory            in 2005 to $1.1 billion in 2006.       Suisse and UBS on the rights
    Swedish institution will even look       private equity investors.                     The figures for the number and      offering of Swiss Re.

                                        NIEDERER KRAFT                                              &     FREY

                                                                    Banking           Judicial Assistance
                                                  Securities and Finance              Insolvency and Restructurings
                                                                  Company             Insurance
                                                               Commercial             Intellectual Property
                                              Mergers and Acquisitions                Project finance
                                             Competition and Antitrust                Aircraft Finance
                                                                           Tax        Wills, Trusts and Estate Planning
                                                                     EC Law           Sports and Entertainment
                                             IT and Telecommunications                Environment
                                              Litigation and Arbitration              Healthcare

                                        Languages spoken: German, English, French, Italian, Spanish, Dutch
                                                          Number of Fee-earners: 65
                                                              Established 1936

                                                           Bahnhofstrasse 13 CH-8001 Zürich
                                                       Tel: +41 58 800 8000 Fax: +41 58 800 8080
                                                         Web: www.nkf.ch E-mail: nkf@nkf.ch

www.iflr.com                                                                                                                       IFLR/November 2006 31
  “Today saying the transaction is legal is not enough. That’s the
   start but not the end of the enquiry.” Ed Greene, Citigroup
    Clear thinking for bankers’ counsel. IFLR.

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“The Sarbanes-Oxley burden of a
 listing in the US can be as much as
 $3 million for foreign companies.”
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