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Cautious Optimism in the Leveraged Finance Market - Joshua Thompson, Shearman & Sterling LLP

LegalMinds Editor — Tue, 13 Sep 2011 15:49:09 +0000

In this exclusive LegalMindsTV interview, Sherman & Sterling’s Joshua Thompson discusses the outlook for leveraged finance transactions.

“We’re seeing a number of interesting deals in the market,” says Thompson. “In addition to bank bond deals and complex refinancing, we’re also seeing private equity sponsors taking the initiative in what remains a relatively good market to do acquisitions and refinance their existing portfolio debt.”

In regard to international activity, he says their firm is continuing to see a vibrant market in Asia, as well as an active London and European market, which continues to remain open to new deals and refinancing.

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We're seeing a number of interesting deals in the market, the complexity remains high in terms of the transactions. We're look looking at a number of bank bond deals, a number of complex refinancings, we continue to see private equity sponsors taking the initiative and using what remains a relatively good marketto do acquisitions and or refinancings of their existing portfolio debt.

We act for many of the significantly late arrangers in the market. Our flow of information suggests that there is somewhat a backlog of commitments but we would anticipate that backlog will clear, and that the market will open again actively after the summer. recent trends in deal terms suggest that the private equity sponsors still have somewhat of the upper hand in terms of negotiating.

But, that being said, the credit issues which lenders remain focused on are total leverage, the de-leveraging story, management of fixed charges and ensuring structural integrity with the credit, I think that reflects a fair balance between the interests of lenders and borrowers . We suspect that there will remain a relatively good deal of flexibility for top tier sponsors in the market, and at later ranges continue to compete very aggressively for their business.

We don't see any dramatic changes in market terms occurring, rather a gradual evolution. That's domestically. Internationally, we continued to see interesting and vibrant markets in Asia. Our colleagues in Asia did one of the few so-called dim sum bonds, which are RNBS denominated bonds out of Hong Kong.

Our colleagues in London and Europe remain very active, although they face similar economic conditions as we do. And the markets, you know, continue to remain open for new deals and continue to remain open for refinancings in Europe. And we continue to see a good deal flow in those jurisdictions.

The outlook for leverage finance in the United States remains relatively robust going into , going through the third quarter and into the fourth quarter of this year. We continue to see what we what we feel is a steady drumbeat of market activity. That being said the larger macroeconomic issues which we're seeing, such as potential sovereign defaults, would be a radical, potentially resulting a radical series of skating events in the leverage finance market which is difficult to predict at the moment but which we remain very focused on.

The outlook also will be contingent on general growth in the United States, and valuations for private equity firms. In particular of their assets. That's M and A teams, see a robust pipe line there and so we would suggest that leverage finance would correlate with what they're projecting as well.

Clients need to be actively engaged with preparing themselves for a number of different potential scenarios in the market. To some extent if you risk adverse, now is the time to start looking heard at your exposure in the debt markets if you believe that there are potentially adverse sovereign risk events that could materialize in the coming months.

That being said, constantly engaging with your potential providers of debt financing, understanding and working with your external advisor so whether that's your legal team, your accountants, your tax advisors, to optimize your debt structure is something that we would always encourage our clients to do.

We do that with our clients. We want to make sure that they're seeing the best opportunities in terms of leverage finance, whether we're acting for the borrower, or the private equity firm, or the late arranger.

We think there is a sense of optimism in the market, but it is cautious optimism, and assisting our clients to execute on great transactions and on financing which is highly tailored to their needs is something that we continue to see going forward

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ATTORNEY INFORMATION

Joshua W. Thompson
Partner, Shearman & Sterling LLP

Joshua W. Thompson is a partner in the Finance Group resident in the New York office. He focuses his practice on complex financings, including acquisition financings and other leveraged lending (including leveraged buyouts, tender offers and other going private transactions), structured financings, second-lien financings and mezzanine investments. In addition, he has extensive experience representing debtors, creditors, management and investors in complex restructurings, work-outs, bankruptcies and acquisitions of troubled companies. As counsel for lead arrangers and private equity sponsors, he is involved in all aspects of deal structuring, negotiation and documentation.Josh also is the former general counsel of Jefferies Finance.

Related Practices, Industries & Focus Areas:

Finance
Structured Finance

Bar Admissions/Qualifications:

New York
New South Wales, Australia

Education:

University of New South Wales, LL.B., summa cum laude
University of New South Wales, B.A.

Selected Business and Professional Activities:

Clerkship: High Court of Australia, Justice W.M.C. Gummow
Member, International Bar Association (Former Vice-Chair of Corporate Counsel Forum)

Contact:

599 Lexington Avenue
New York, NY 10022
(212) 848-8703

joshua.thompson@shearman.com

To see a full bio, visit: http://www.shearman.com/joshuathompson

FIRM INFORMATION

Shearman & Sterling has been advising many of the world’s leading corporations and financial institutions, governments and governmental organizations for more than 135 years. We are committed to providing legal advice that is insightful and valuable to our clients. This has resulted in groundbreaking transactions in all major regions of the world.

For additional information, visit: http://www.shearman.com

Other Shearman & Sterling Featured Video Interviews:

Structuring Public and Private Transactions
in the Current M&A Environment
Clare O’Brien, Partner, Mergers & Acquisitions Group
Shearman & Sterling LLP

Click image to view the video.

Emerging Growth in Latin America’s Capital Markets
Antonia Stolper, Partner and head of Latin America Practice
Shearman & Sterling LLP

Click image to view the video.

Structuring Public and Private Transactions in the Current M&A Environment - Clare O'Brien, Shearman & Sterling LLP

LegalMinds Editor — Thu, 14 Apr 2011 17:17:11 +0000

As many companies and private equity firms have been accumulating large amounts of cash over the last three years, they’re coming under increased pressure to deploy that cash productively. According to Clare O’Brien, a partner in the Mergers & Acquisitions Group at Shearman & Sterling LLP, this has led to an increase in M&A activity — both public and private transactions.

In this exclusive LegalMinds interview, Ms. O’Brien discusses these trends and explores some of the key issues in structuring both public and private M&A transactions — from basic considerations such as whether the transaction should be a merger or tender offer to the impact of decisions such as which assets should be sold, what kinds of liabilities should be accepted, retaining employees and sharing any intellectual property.

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*Full Transcript Coming Soon.

ATTORNEY INFORMATION

Clare O’Brien
Partner, Shearman & Sterling LLP

Clare O’Brien has been a partner since January 1995. She joined the firm in 1988 and in 1989 moved to the Mergers & Acquisitions Group, where she has worked on a large variety of public and private transactions, including public company restructurings, joint ventures and large public transactions. She also advises clients regularly on mergers and acquisitions and other corporate law questions.

Prior to joining the firm, Ms. O’Brien worked with the law firm of Brady & Tarpey, P.C., where her practice included cross-border corporate transactions, litigation and domestic relations. Ms. O’Brien began her legal career at the Irish law firm of Eugene F. Collins & Son, and was admitted to the Irish Roll of Solicitors in 1985.

Practices:

Mergers & Acquisitions
State Controlled Companies/Sovereign Wealth Funds

Admissions:

New York
Ireland

Education:

Incorporated Law Society of Ireland
Trinity College, Dublin, B.A. Legal Science

Contact:

599 Lexington Avenue
New York, NY 10022
(212) 848-8966

cobrien@shearman.com

To see a full bio, visit: http://www.shearman.com/cobrien/

Recent Publications:

SEC Proposed Amendments – Proxy Disclosure, Solicitation Enhancements and NYSE Rule 452
Guidelines for Directors in Change-of-Control Transactions

FIRM INFORMATION

For additional information, visit: http://www.shearman.com

Other Shearman & Sterling Featured Video Interviews:

Emerging Growth in Latin America’s Capital Markets
Antonia Stolper, Partner and head of Latin America Practice
Shearman & Sterling LLP

Click image to view the video.

Share Repurchase Considerations - David M. Lynn and David H. Kaufman, Morrison & Foerster LLP

LegalMinds Editor — Wed, 19 Jan 2011 13:39:21 +0000

With an improving economy and an increase in cash assets, many companies are expanding their stock buyback activity. While few expect an increase to the levels seen five years ago, which capped a meteoric 25 year rise from $5 billion to almost $350 billion, there has been a steady growth in share repurchase in the past year — with 128% growth in Q3 2010 among S&P companies.

In this exclusive LegalMinds/NASDAQ Securities & Capital Market Series interview, David Lynn and David Kaufman, Partners at Morrison & Foerster LLP, discuss some of the considerations involved in a stock repurchase program — ranging from regulatory issues to the impact on shareholder value.

According to Lynn, Co-chair of the firm’s Public Companies and Securities Practice and former Chief Counsel of the Securities and Exchange Commission, “I think one of the first considerations is if I have a lot of cash on my balance sheet, my shareholders are often going to be pretty impatient about whether I can pull that cash into investments or acquisitions or other uses that are going to benefit the shareholders in the long run.” If the company believes the stock is undervalued, then a repurchase program can help support a more “correct” valuation. Additionally, it can also help reduce dilutive effects of the exercise of stock options or offset securities coming out because the company is making acquisitions.

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Though Lynn adds that there are also several downsides to share repurchase programs, including a potential downgrade if the company needs to go out and borrow the cash. He says it should also be considered whether it is the best “alternative for the use of it’s cash,” which in addition to acquisitions or investments, could include offering dividends to investors.

Once deciding on a repurchase program, there are significant steps to assure it’s successful execution. “I think sometimes there’s a misconception that you can just go out and start a stock repurchase program overnight,” says Lynn. But it does require some advance planning and due diligence on the part of the company, as well as board authorization. “It’s very important that the board determine that the share repurchase program is in the best interest of the company and the shareholders.” Going forward, other issues to address include existing provisions in the charter and bylaws, arrangements with market participants, price limitations and meeting disclosure requirements.

Two very important considerations in a share repurchase program are the SEC’s anti-manipulation provisions and anti-fraud or insider trading regulations, which are discussed by Kaufman, who is ranked as one of America’s leading capital markets–derivatives and structured products attorneys by Chambers USA and Chambers Global.

“The SEC has a number of restrictions under the 33 Act and the 34 Act that would apply to stock repurchase program,” says Kaufman. “First and foremost are the rules regarding anti-manipulation and that a company can’t be seen as manipulating its own stock through executing a repurchase program. Second, companies need to be very careful that they comply with the antifraud rules under the Federal Securities laws.”

In addition to current disclosure requirements, Kaufman also discusses the SECs proposal to modify what’s known as Rule 10b-18, which is the rule that provides a safe harbor under which companies can execute stock repurchase programs. According to Kaufman, the SEC was trying to create a little more flexibility for issuers – adding a concept known as 10b-18 VWAP (Value Weighted Average Price) to the rule – in terms of how issuers execute their buyback, including timing issues.

Kaufman also advises clients to “step back and have a very fruitful and a constructive conversation” with their advisors – their broker-dealer, investment banking advisor, whomever – regarding just what type of share buyback, if any, they want to execute because there are quite a variety of characteristics and potential effects. “For example,” Kaufman adds, “ASRs (Accelerated Stock Repurchase programs) have different accounting effects, as I said, but possibly different economic performance attributes. And all of these may have different aftermarket impacts in terms of how the stock performs once the program is up and running or completed.”

View and download a PDF transcript of the full interview — coming soon.

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ATTORNEY INFORMATION

David M. Lynn
Partner, Morrison & Foerster LLP

David Lynn is a co-chair of the firm’s Public Companies and Securities Practice. Mr. Lynn’s practice is focused on advising a wide range of clients on SEC matters, securities transactions and corporate governance. Mr. Lynn is well known in the area of executive compensation disclosure, having co-authored, “The Executive Compensation Disclosure Treatise and Reporting Guide.” While serving as Chief Counsel of the Securities and Exchange Commission’s Division of Corporation Finance, Mr. Lynn led the rulemaking team that drafted sweeping revisions to the SEC’s executive compensation and related party disclosure rules.

Mr. Lynn re-joined the SEC as Chief Counsel shortly after adoption of the Sarbanes-Oxley Act of 2002, and served in that position until 2007. As a result, he was intimately involved in implementing and interpreting the record amount of SEC rulemaking that occurred in the wake of SOX. Mr. Lynn initially served on the SEC staff from 1995-2000 as an Attorney-Advisor and subsequently a Special Counsel in the Division of Corporation Finance. While in private practice from 2000-2003, he advised clients on SEC investigations, securities transactions, mergers and acquisitions and corporate governance.

Contact:

2000 Pennsylvania Avenue, NW
Washington, DC 20006-1888
(202) 887-1563
dlynn@mofo.com

To see a full bio, visit: http://www.mofo.com/david-lynn/

Related Interviews:

Say-on-Pay and Other Issues for the Upcoming Proxy Season
Click image to view the video.

David Kaufman
Partner, Morrison & Foerster LLP

David Kaufman concentrates on derivatives and commodities transactions, mergers and acquisitions and private equity financings. He also has extensive experience with reorganization and insolvency matters. Mr. Kaufman works closely with the firm’s financial institution clients in the equity and credit derivative markets, where his activities are concentrated on assisting the firm’s clients in designing and structuring new products and evaluating the securities and commodities law issues implicated by the hedging and monetization techniques associated with these products. His work in this area often involves counseling financial institution clients regarding the particular regulatory, tax, accounting or economic objectives of a new product.

Mr. Kaufman has represented numerous funds and individuals in negotiating and documenting equity derivative transactions designed to hedge and/or monetize large or illiquid share positions. He also works closely with the many large commodities trading firms, focusing in particular on transactions involving energy, precious and base metals, currencies and agricultural products. His work in these areas has involved structuring and documenting trading, hedging and financing transactions, together with associated margin and other collateral arrangements.

A significant aspect of Mr. Kaufman’s work in the derivatives and commodities field involves assisting clients in assessing and mitigating the credit and various trading risks that are integral to derivatives and commodities transactions. In addressing risk management issues, Mr. Kaufman has acquired extensive experience in structuring complex collateral arrangements and liquidation and setoff provisions, and in analyzing such arrangement and provisions under the UCC, other applicable lien laws, the federal bankruptcy code and other insolvency regimes.In his mergers and acquisitions work, Mr. Kaufman represents both strategic and financial market participants, as well as mezzanine lenders, private equity funding sources and key management personnel. Mr. Kaufman’s work in the private equity field also includes representing emerging (primarily technology) companies and venture capital investors in such companies. Mr. Kaufman frequently counsels holders of restricted or otherwise illiquid capital stock regarding securities law issues relating to the ownership and transfer of such stock.

Practice Areas:

Capital Markets
Financial Institutions + Financial Services
Corporate

Admissions:

New York

Education:

University of Rochester (B.A., 1980)
Harvard Law School (J.D., 1983)

Contact:

1290 Avenue of the Americas
Washington, DC 10104-0050
(212) 468-8237
dkaufman@mofo.com

To see a full bio, visit: http://www.mofo.com/david-kaufman

Publications:

“Credit Derivatives: Recent Regulatory Developments in the United States,” Derivatives Law Report, Vol. 29 Issue 6, June 2009

“Securities Markets: Short Selling Under Fire,” INSIGHTS, Vol. 11 Issue 11, November 2008

“Is Cash Still King in Acquisitions?,” Financier Worldwide, January 2007

FIRM INFORMATION

We are Morrison & Foerster—a global firm of exceptional credentials. Our clients include some of the largest financial institutions, investment banks, Fortune 100, technology and life science companies. We’ve been included on The American Lawyer’s A-List for seven straight years, and Fortune named us one of the “100 Best Companies to Work For.” Our lawyers are committed to achieving innovative and business-minded results for our clients, while preserving the differences that make us stronger.

For additional information, visit: http://www.mofo.com

Other Morrison & Foerster LLP Featured Video Interviews:

Share Repurchase Considerations
David M. Lynn and David H. Kaufman, Partners, Morrison & Foerster LLP

Click image to view the video.

Hybrid Financing: Certain Ideas for Uncertain Times
James Tanenbaum, Chair of Morrison & Foerster’s Global Capital Markets practice

Click image to view the video.

Preparing to Raise Capital in Volatile Markets Using a Shelf Registration
Anna T. Pinedo, Partner, Morrison & Foerster LLP

Click image to view the video.

“Say on Pay” and Other Issues for the Upcoming Proxy Season
David M. Lynn, Partner and Chair of Public Companies and Securities Practice, Morrison & Foerster LLP

Click image to view the video.

Challenges & Opportunities Accessing Capital Markets - Steven Khadavi, Dorsey & Whitney LLP

LegalMinds Editor — Thu, 07 Jan 2010 23:25:43 +0000

Changes in the regulatory landscape are having a profound impact on companies seeking to access the capital markets. In this exclusive LegalMindsTV interview, Steven Khadavi, Co-Chair of the Capital Markets practice Group at Dorsey & Whitney LLP, discusses some of the challenges these companies face.

According to Khadavi, “companies considering accessing the capital markets need to carefully weight the costs and benefits of these transactions. In addition to being an expensive and time consuming process, it can create a significant diversion of management’s time, as well as add significant burdens in terms of disclosures and regulatory compliance.”

“Accessing the capital markets is a long process,’ says Khadavi. The lead time to commencing a transaction is probably a year or so and in that time you need to “start thinking like a public company.” This includes engaging PCAOB certified auditors and an accounting firm that’s familiar with SEC reporting and be able to go through the capital markets process. Companies also need to consider the impact of the Sarbanes-Oxley Act, which entails large upfront costs for testing internal controls and procedures – particularly the first time around.

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View and download a PDF transcript of the full interview here.

_____________________________________________________________________________

ATTORNEY INFORMATION

Steven Khadavi
Partner, Dorsey & Whitney LLP

Steven Khadavi is a partner in Dorsey’s Corporate group and Co-Chair of the firm’s Capital Markets practice group. He has extensive experience in corporate finance and securities law, as well as mergers and acquisitions.

Mr. Khadavi has represented underwriters and issuers in public and private debt and equity offerings, debt tender offers, consent solicitations, exchange offers and public and private acquisitions. He has represented clients in the United States and abroad in various sectors, including telecommunications, healthcare and consumer products. He also advises clients with respect to corporate governance and Sarbanes-Oxley matters.

Admissions:
New York

Education:
George Washington University Law School J.D., 1996, With Highest Honors; Order of the Coif
Clark University B.A., Economics, 1993, With Honors

Contact:
250 Park Avenue
New York NY 10177-1500
(212) 415-9376
khadavi.steven@dorsey.com

To see a full bio, visit: http://www.dorsey.com/people/detail.aspx?Attorney=180&mode=full

Publications:

Changes to New York Power of Attorney Law Could Have Broad Implications, September 2009
SEC Mandates Use of XBRL for Financial Statements, June 4, 2009
Debt Exchange Lowdown, The Deal, April 4, 2009
“Overcoming the Challenges of New Disclosure Regulations,” SEC Compliance Best Practices: Leading Lawyers on Understanding Disclosure Requirements, Developing Compliance Procedures, and Advising Clients on Reporting Practices (Inside the Minds), April 2009
“Exchange-Offer Alternatives for Issuers of Debt Securities,” Andrews Litigation Reporter, February 10, 2009
Companies Should Look Closely at Risk Factor Disclosure in Light of the Current Financial Crisis, February 10, 2009; A version of this article was republished in the March 2, 2009 Andrews’ Litigation Reporter
“The Viability of Maintaining Successful Actions against the RTC and the FDIC.” Volume 63, George Washington Law Review, 1996

FIRM INFORMATION

Clients have relied on Dorsey since 1912 as a valued business partner. With more than 650 lawyers in 19 locations in the United States, Canada, Europe and Asia-Pacific region, Dorsey provides an integrated, proactive approach to its clients’ legal and business needs. Dorsey represents a number of the world’s most successful Fortune 500 companies from a variety of disciplines, including leaders in the financial services, investment banking, life sciences, securities, technology and energy sectors, as well as nonprofit and government entities.

For additional information, visit: http://www.dorsey.com

Trends in Energy Company Finance, Post-Financial Crisis - Jeffrey Delaney, Pillsbury Winthrop Shaw Pittman LLP

LegalMinds Editor — Tue, 05 Jan 2010 02:20:35 +0000

The volatility in the financial markets has been a wake up call for the energy sector. According to Jeffrey Delaney , Partner and coleader of the Energy Industry team at Pillsbury Winthrop Shaw Pittman LLP , “treasury and finance folks need to take a critical look at their liquidity strategy, their capital structure and financing plans and try to think outside the box.”

In this exclusive interview with LegalMindsTV, Delaney discusses the impact of the Lehman bankruptcy, financial and industry trends and capital markets strategies which energy companies need to focus on in the coming year.

CONTINUE READING SUMMARY (Click to Expand/Collapse)

View and download a PDF transcript of the full interview here.

_____________________________________________________________________________

ATTORNEY INFORMATION

Jeffrey J. Delaney

Partner, Pillsbury Winthrop Shaw Pittman LLP

Mr. Delaney is coleader of Pillsbury’s Global Energy industry team and also leads the New York Corporate & Securities local practice. He advises issuers and underwriters on public and private offerings of debt and equity securities, principally in the energy industry. Specifically, he acts as regular underwriters’ counsel for a number of energy and utility companies in the United States. In addition, he acts as regular underwriters counsel in connection with multiple funding agreement backed medium-term note programs(registered and private) for domestic life insurance companies. He also represents a bank holding company in connection with its financings. Lastly, Mr. Delaney regularly advises on drug royalty monetizations and related transactions for a major investment bank.

Recent indicative transactions include first mortage bond and other secured bond financings and preferred stock financings for energy and utility companies and bank note financings for a bank holding company.

Mr. Delaney was cited in the 2008 edition of Chambers USA: America’s Leading Lawyers as top in his field for Energy Finance and, in 2007, was selected as a member of The BTI Client Service All-Star Team for Corporate Transactions 2008.

Admissions:

State of Connecticut and State of New York

Education:

J.D., Pace University School of Law, 1992, summa cum laude, Valedictorian; Member and Research and Writing Editor, Pace Law Review; B.A., Pace University, 1989, summa cum laude

Contact:
1540 Broadway
New York, NY 10036-4039
212-858-1292
jeffrey.delaney@pillsburylaw.com

For additional information, visit: http://www.pillsburylaw.com/index.cfm?pageid=15&itemid=21152

Publications:

8/17/2009 Client Alert—Recent Bankruptcy Court Ruling Has Major Implications for Structured Financing

1/15/2008 Client Alert—Practical Considerations for Revised Rule 144

3/10/2006 Practical Lessons Learned From the First 100 Days of Securities Offering Reform

FIRM INFORMATION

Pillsbury Winthrop Shaw Pittman LLP is a full-service law firm with market-leading strengths in the energy, financial services, real estate and technology sectors. Based in the world’s major financial and technology centers, Pillsbury counsels clients on global corporate, regulatory and litigation matters. We work in multidisciplinary teams that allow us to anticipate trends and bring a 360-degree perspective to complex business and legal issues — helping clients to take greater advantage of new opportunities and better mitigate risk. This collaborative work style helps produce the results our clients seek.

For additional information, visit: http://www.pillsburylaw.com