IFLR 1000
The Guide to the World's Leading Financial Law Firms

CONTEXT AND TRENDS
Sweden continues to experience credit contraction as a result of the general European debt crisis and the "new regime". With Basel III regulations in the pipeline banks are suffering and have "become much more picky over the last 12 months in choosing borrowers" says one partner....

CONTEXT AND TRENDS

Sweden continues to experience credit contraction as a result of the general European debt crisis and the "new regime". With Basel III regulations in the pipeline banks are suffering and have "become much more picky over the last 12 months in choosing borrowers" says one partner. With bank debt increasingly expensive there has been a decrease in the number of large financing transactions underway in Sweden and an increased interest in alternatives to traditional bank financing.

The LBO financing market in Sweden, which at one point would have sat at 80%, continues to wane in 2012 with increases in the use of the bond market, asset finance and shadow banking deals instead.

Borrowers who need to top up their equity are turning either to PE or increasingly more creative ways on the bond market. According to one lawyer: "The high-yield market is filling up a funding gap. There will be a lot of refinancing up and coming in the next two years and banks are less keen to lend." Firms point to the emergence of a number of strong investors, for example insurance companies who are traditionally less keen on the stock markets.

More companies are looking at high yield bonds (not only in PE but also traditional corporate) as an alternative to bank lending. According to one partner "a really effective new financing source could come from insurance companies, mutual funds, people looking for safe returns within reasonable margins without being private investors".

The extent to which their services will be required in this area will depend on whether corporates decide to plump for a structured high-yield product or a tailored corporate bond. As one lawyer explains: "With companies under extreme price pressure they probably won't want to pay lawyers and will opt for a very standardised product."

Another trend relates to the time it takes to push a work to close. According to one partner: "Everything is taking a lot longer to complete now, with people still discussing terms forwards and backwards. Also, a lot of work ends up falling away on commercial terms."

One area that has received a boost relates to compliance. "All regulations are creating a tidal wave of compliance work, it's the new black," says one lawyer "two to three years ago we completely underestimated this area. Now it is the hottest."

In addition, there has been an upwards stream in regulatory work centred around solutions to the infrastructure impasse since the funding crisis which has effected roads and hospitals in particular. "How do we update them? There's a huge need but no money" explains one partner "this is generating a fair amount of work."

Furthermore, uncertainty relating to the Eurozone crisis and a potential Greek exit is necessitating discussions on the possible waivers of financial covenants. "So far the market hasn't experienced a huge wave of catastrophe restructurings but that could be on the way" says one lawyer.

Lawyers' note that soon banks will be forced to reduce their balance sheets. Meanwhile the question on lawyers mind is will the banks refinance everything on their books so they can start doing new deals and if so when will this unblock lending?

CONTEXT AND TRENDS
Turbulence in Europe and a freeze on bank lending is putting increased pressure on the Swedish capital markets. In equity, lawyers describe the market as "almost non-existent" with no IPOs issued in 2012 at the time of publication....

CONTEXT AND TRENDS

Turbulence in Europe and a freeze on bank lending is putting increased pressure on the Swedish capital markets.

In equity, lawyers describe the market as "almost non-existent" with no IPOs issued in 2012 at the time of publication. That's despite a good first quarter trading where prices increased on the stock exchange.

Market observers say issues are starting to re-emerge at the €70 million mark. "We are getting a lot of calls and there has already been a small issue this year in the Swedish domestic market with a private equity domestic fund." More broadly, Nordic-wide activity started to emerge during the winter of 2011. There is a lot of hope but we will wait to see what happens" says one lawyer.

Either way one lawyer predicts the emergence of a local Nordic bond market "which may be forcing the banks to wake up" to new financing. "We've seen real estate related bonds already and sponsors and lenders are now asking questions".

There has been "a renewed interest for bonds and different types of bond, with respect to public M&A" however, as one lawyer qualifies: "The number of public takeovers on Nasdaq OMX Stockholm in the last 12 months has been small. Some of the public offers have been subject to competing bidders and have consequently attracted media interest."

Another burgeoning trend is the corporate bond. Not a historically common instrument used in Sweden, the corporate bond is fast becoming a financing alternative for desperate companies.

In addition, lawyers point to an increase in convertible bonds as a trend. "This is extremely unusual for Swedish listed companies to issue. Previously they would have listed shares and adopted a very conservative approach with respect to other types of instrument," says one partner."

MAJOR LATERAL HIRES

Charlotte Levin
From: Linklaters
To: Vinge

Rikard Stenberg
From: Vinge
To: White & Case

Ola Sandersson
From: Vinge
To: Roschier

Pontus Enquist
From: Vinge
To: Roschier

Jan Lombach
From: White & Case
To: Törngren Magnell

CONTEXT AND TRENDS
"Volatile" is possibly the most accurate description of the Swedish M&A markets over the last 12 months. Early 2011 experienced bursts of "very high deal activity", owing in large part to private equity funds finally exiting portfolio companies....

CONTEXT AND TRENDS

"Volatile" is possibly the most accurate description of the Swedish M&A markets over the last 12 months. Early 2011 experienced bursts of "very high deal activity", owing in large part to private equity funds finally exiting portfolio companies. In the latter half of 2011 deal flow resumed slowly but was "driven by trade buyers as the turbulence on the financial markets took its toll on private equity financing", says one partner.

"The Eurozone crisis puts Sweden in a similar position to the rest of Northern Europe; there are very small numbers of large transactions but there are a good number of small to medium sized deals to keep firms busy." Another lawyer describes the M&A market thus: "It's not a recession but there is modest growth and certainly not as gloomy as parts of Europe."

Meanwhile work is quite widespread across diverse range of industry sectors from consumer to healthcare, heavy industry and energy remains resilient.

The Nordic private equity industry remains strong with the launch of a number of new firms. However, one lawyer suggests: "Despite being in a reasonably comfortable place since the Lehman brothers collapse, they are probably biding their time...waiting like everyone else for the turmoil in Europe to settle."

Despite the current patchy market lawyers are expecting an imminent Tsumani of deals to come off the back of enormous private equity investments made from 2005 to 2007. "The only question is when will firms start to exit" says one partner. "We don't have a financial crisis on a domestic level therefore we are still investing in the Nordic region because it is going to get busy."

One trend emerging relates to securing of mandates in what one partner describes as "less of a willingness to invest in the auction process. Never before have we experienced so many broken deals and instructions that fade out. There used to be ten bidders now we're lucky if there are two."

Until further clarity comes from the Eurozone it seems likely the "wait and see" transactional mood will remain in Sweden.

MAJOR LATERAL HIRES

Malin Leffler
From: Vinge
To: Roschier

Ola Sandersson
From: Vinge
To: Roschier

Pontus Enquist
From: Vinge
To: Roschier

Jan Lombach
From: White & Case
To: Törngren Magnell

Jan Byström
From: Vinge
To: Ashurts

Roger Johnson
From: Hannes Snellman
To: Linklaters