22 December – LAWFUEL – The Law News Network – In the closing weeks of 2005, Clifford Chance has advised on a record-breaking 13 transactions representing over € 50 billion of issuance of synthetic collateralised loan obligations (“CLOs”). Operating out of three offices, the Firm advised on a range of public and private deals, including Start CLO, Epic (Ayton), Gracechurch Corporate Loans Series 2005-1 and Stichting Profile Securitisation I. Notable transactions included the first public synthetic CMBS and some of the largest European synthetic CLOs to date.
Synthetic CLOs are a securitisation structure by which banks can transfer the credit risk of loan portfolios by the use of credit derivative technology, enabling the banks to manage their balance sheets and create efficiencies of regulatory capital.
There is always an increase in synthetic CLO issuance at year end, reflecting the regulatory reporting cycle for European banks. However 2005 has seen a significant increase over previous years, reflecting a new buoyancy in this market and indications that the uncertainty of the impending implementation of the new regulatory capital requirements under Basel 2 is no longer hindering the use of these structures by banks. a continued flow of these sort of deals is to be expected as the technology is developed for new asset classes such as PFI loans, CMBS and carbon credits.
Over 20 partners and 50 lawyers worked on the deals for a variety of clients, including RBS, Merrill Lynch, Standard Chartered Bank and Barclays Capital. Kevin Ingram, partner and Head of the Securitisation Group in London commented, “For many law firms, acting on one synthetic CLO alone can be a stretch, but it is an indication of Clifford Chance’s pre-eminence in this sector that it can advise on over a dozen deals concurrently.”
“I would challenge anyone to point to another firm that can combine teams of specialists in securitisation, derivatives, tax, regulatory capital and real estate operating out of three European financial centres which could handle even half this number of transactions,” said Claude Brown, the London partner responsible for the derivative aspects of synthetic CLOs.