financial services

Financial Services

The financial services industry, probably more than any other, reflects the larger political landscape which drives the monetary and fiscal policies that set its operating realities, as well as the regulatory environment which determines its freedom of maneuver. It has undergone substantial infusions of digital reinvention to meet the successive challenges of an array of entrants. These range from virtual currencies, blockchain’s distributed public ledgers, fintech upstarts, crowdfunders, and payments and processing technologies, to the upsurge in high frequency traders in investment management, and robo-advisers and index funds displacing investment advisers. Private equity has been heavily challenged on its fee model and hedge funds have endured—and come through—a tempestuous year. Private debt came out of the shadows and now has a secure spot in the funding firmament. Despite all this noise, the sector overall, at least in the U.S., is now thriving.

Our Partners' Perspectives

What do you see as the biggest changes impacting how lenders approach their business?

We are living in an era where technology and society are evolving faster than businesses can adapt. Banks and nonbank lenders can no longer expect a successful investment based solely on an analysis of historical financials, audits, and projections. The analysis also must be through the prism of whether the business is a leader in technological and customer advancement and is equipped to address geopolitical unrest, cybersecurity threats, and an ever-changing regulatory environment.

Jennifer Yount

New York

Looking at where the U.S. finance market is headed this year, where do you see the most significant opportunity for our clients?

Due to unsettled views on the Trump administration and any regulatory changes it may effect with respect to the U.S. financial industry, aside from the expressed determination to deregulate, lenders and borrowers should remain opportunistic and stay flexible in order to capitalize on favorable windows in the credit markets for new high-yield issuances, re-pricings, and dividend recaps—especially in the face of rising interest rates, which may well affect the M&A and lending market.

John Cobb

New York

Private debt is fast becoming one of the most important asset classes. What market dynamics should private debt investors be aware of?

Markets are rapidly converging and fundraising has been white hot. Private debt funds raised an impressive US$111B in 2016, half of which was raised by “global funds,” as U.S. and European investors continue to infiltrate one another’s markets. There has also been a dramatic convergence between the middle market and the large cap space, which have historically demanded distinctly different credit and intercreditor terms. Private equity investors continue to seek large cap terms in middle market deals while a number of private debt investors are moving up market, making single investments of up to US$1B and closing transactions that have historically been left solely to the large bank syndicated market. All of these market convergences are expected to continue in 2017, putting a premium on investors’ ability to adapt accordingly in an increasingly competitive environment.

William Brady

New York

What is the top trend or development for our clients to follow in the structured finance and collateralized loan obligation space in the year ahead?

In the past six months, there has been a wave of refinancings in the European and U.S. CLO markets, enabling investors and managers to use tightening liability spreads to enhance equity returns. However, this activity masks the main issue that CLO managers in Europe are currently grappling with—namely, the paucity of leveraged loans being originated that are available to feed the European new issue CLO market. The hope is that the tight credit spread environment, which has fuelled the CLO refinancing market and has bled into the leveraged loan market, will stimulate the higher leveraged loan origination activity on which the CLO market depends.

Michael Smith, Diala Minott and Cameron Saylor

London

What is the key trend for our financial services clients to consider as the securities enforcement landscape continues to evolve?

The new administration’s promised regulatory reforms will have major implications for the U.S. financial services landscape, but the core elements of the existing enforcement architecture are unlikely to be immediately dismantled. This includes trends such as the growing reliance on data analytics, which are likely to increase in importance as a support for evidence gathering and prosecution. The SEC signaled its willingness to prosecute larger and more complex international cases, making it imperative that firms ensure that scrupulous record-keeping forms part of their internal compliance mandate. The increasing protections given to whistleblowers are another noteworthy trend. It will be interesting to see if they are preserved under the new regime.

Douglas Flaum

New York

Addition of leading Structured Finance team strengthens our global Finance practice

A Closer Look

What's Next for Payments: Virtual Currency

Highlights of Our Client Successes

Bass Pro’s US$5.1B acquisition

We represented BofA Merrill Lynch, Wells Fargo Securities LLC, Wells Fargo Bank, National Association, Citigroup Global Markets Inc., Goldman Sachs Lending Partners LLC, RBC Capital Markets, and UBS Securities LLC, as the lead arrangers for committed financings of over US$5B in the aggregate consisting of term loan and asset-based facilities in a definitive agreement by outdoor recreation retailer Bass Pro Group, LLC to acquire Cabela’s Incorporated. In connection with this transaction, Bass Pro Group has secured a preferred financing commitment of approximately US$2.4B and Cabela’s will sell certain assets of World’s Foremost Bank to Capital One, National Association.

UniCredit’s complex €1.3B securitization

Our team advised UniCredit on the structuring of a complex securitization, to be completed in several stages, involving a portfolio of mid- and long-term real estate receivables with an overall value of approximately €1.3B. The receivables involve approximately 40 different borrower entities and are guaranteed by properties in different phases of development. The deal is meant to help our client optimize the chances of debt recovery through ad hoc agreements with the debtors, by enhancing the management of the properties, and in selected cases by implementing measures aimed at the development, renovation, and marketing of the assets.

SeaWorld underwriters secure dismissal of securities claims

We recently obtained a dismissal of all claims asserted against the underwriters of SeaWorld Entertainment Inc.’s IPO and two secondary offerings. The U.S. District Court for the Southern District of California granted our motion to dismiss, finding that there was no material misstatement or omission in the offering documents. Our lawyers represented all 16 underwriters named in the action, which included many of the largest global investment banks.

Altice/Suddenlink’s US$1.5B bond offering

We advised JP Morgan, Bank of America Merrill Lynch, Barclays, BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs, Morgan Stanley, and RBC on the US$1.5B senior secured bond issued by Suddenlink. During the past year, we also advised Goldman Sachs and Deutsche Bank as lead arrangers and book runners on the US$815M term loan B refinancing of Suddenlink’s existing term loan facilities. Suddenlink is the 7th largest U.S. cable operator and is majority owned by Altice, following its US$9.1B acquisition in 2015, on which we acted for JP Morgan and BNP Paribas on the US$6.7B financing package.