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

CONTEXT AND TRENDS
In a bold and novel move in July 2012, the Danish central bank lowered its main deposit rate for banks to negative numbers (0.2%)....

CONTEXT AND TRENDS

In a bold and novel move in July 2012, the Danish central bank lowered its main deposit rate for banks to negative numbers (0.2%). This is likely to encourage a surge of bank lending and shake-up the market, something long overdue according to one partner: "The Danish banking sector is strange. It's a small country but we still have more than 100 small village banks and these are really suffering. Every couple of weeks you hear another one has gone belly up. For the law firms this is generating a lot of work. We expect there to be a lot more consolidation on the way and it's needed."

Commentators describe the last 12 months as 'slow', 'steady' and 'the opposite of booming', with banks continuing to scale down lending to "pretty non-existent levels, banks aren't using EMTN programmes. Our international ratings have gone down, it's tough for banks to get loans at reasonable rates and there are now so many failing banks that foreign investment is reluctant," says one lawyer. Funding can still be obtained by non-domestic banks, but even then as one lawyer says: "Money is only there for a transaction of a certain magnitude. We're talking about half a billion minimum and even then this won't be financed from within the Nordics."

Restructuring provides the steady flow of work for the big firms, most of whom retain a portfolio of international clients selling financial services to Denmark. "We are still very busy dealing with the aftershocks of crisis in the financial sector with mergers, capital increases and winding-up of institutions key." Other sectors experiencing activity include real estate but the bulk remains government-led rescue work on failing banks.

This has had a positive effect on debt capital markets with companies accessing funds through the corporate bond markets. Experts confirm that over the last 12 months they have started to see the return of corporate bond issues as a cheaper and easier loan option for the borrower. In addition, "the high cost of bank finance and lessons learnt from the crisis have led the large Danish corporates to pursue a more diversified funding strategy to the European debt capital markets," according to one partner.

ECM (equity capital markets), is not quite so vibrant. "Equity is very fragile although there are some big international clients," says one partner.

Opinion as to the health of acquisition finance is mixed. One partner says: "The Danish market has witnessed a notable rise in the number of new deals, including leveraged acquisition financings involving Danish targets" while a less optimistic lawyer says: "Acquisition finance hasn't been available for ages, it became more attainable at the tail end of 2011 but it's not booming by any means. There have been a number of deals in shipping though."

In project finance, there has been a degree of investment from international sovereign financiers such as Danish ECA (Eksport Kredit Fonden) and EIB (European Investment Bank) on particular projects, namely renewable energy in wind and solar.

One source of mandates is regulatory work within the financial sector. This is in part due to the regulator issuing a constant flow of updates and amendments. As such one lawyer observed a "growing market demand for advice on the complex and detailed regulation of the financial sector".

RISING STARS

Accura
Morten Jensen

CONTEXT AND TRENDS
M&A has been picking up steadily in the second half of 2012 but it remains a very fragile environment with a high percentage of deals never reaching the finish line. "Before we would work like crazy for three to six months to close a deal, now after two weeks it is off," explains a partner....

CONTEXT AND TRENDS

M&A has been picking up steadily in the second half of 2012 but it remains a very fragile environment with a high percentage of deals never reaching the finish line. "Before we would work like crazy for three to six months to close a deal, now after two weeks it is off," explains a partner.

The top firms are being kept busy with distressed work, mainly servicing corporate clients and assisting Danish and international banks to pledge in shares or assets. Non-distressed, solid M&A is more abundant than last year but 'still shaky'. One partner explains the situation: "After three years where industrial players came in to replace private equity, it's now returned to the market with a number of high profile structured deals. That said, private equity clients have been affected by the crisis because of limited access to debt. The good ones can still establish a new fund so they need to sell their portfolios. They still can't get the price they want and are hesitant but there has to be huge activity soon. Many are at the end of their investments and need to divest or they'll have a huge problem."

It had been thought that the general decline in the stock market would have precipitated a sharp increase in public/private deals, but these kind of transactions are still surprisingly low and many put that down to a non-convergence of buyer and seller price expectations. "Buyers are still not convinced prices have reached a historical bottom and sellers still remember the high figures from 2007 so there's a disconnect agreeing on purchase price," explains one partner. Another lawyer predicts that recent interest from potential investors suggests things are about to pick up: "The bridge between sellers and buyers expectations have aligned and the banking market has been restructured so there is a 50/50 debt to equity ratio on financing transactions.

One lawyer describes the M&A climate as predicated on a 'cautious optimism' noting that they are seeing many more cross-border deals with five or six bidders valued at upwards of €10 billion, something rare if not unheard of in 2010.

The most active fields are biotech and pharma, which have been left relatively unscathed by the banking crisis. Another success story is the energy sector, primarily renewables. One lawyer notes: "The acquisition of windmill parks is a busy area because buyers tend to be the large Danish corporates with outside investment coming from the US and the UK. Also. the industrial sector is not dead, but is going at a lower pace."

One trend that's resulted from the stop and start culture of transaction flow is a tendency for firms to introduce more break clauses to ensure greater deal protection. Another knock on effect is that tender offers are now more likely to be completed as part of a private transaction as opposed to through an auction process. "Soft markets mean we don't see so many structured auctions at work. There's also a lot of inbound M&A work to Denmark as a result of the maturity of the market. This means corporate control is moving from the Danes to the US and the UK who are taking assets out. There is a lot of media hype and protectionism over this but we believe it's the only way to make businesses thrive and grow," says a partner. "We need to tread carefully. The market is volatile and it won't take too much negativity for people to become hesitant and things to bottom out again."

RISING STARS

Plesner
Esben Kjær
Thomas Holst Laursen

CONTEXT AND TRENDS
Despite the number of bankruptcies having fallen in the course of the last 12 months, an estimated 70% of all insolvency cases in Denmark result in bankruptcy. What has shifted is the sector this is affecting....

CONTEXT AND TRENDS

Despite the number of bankruptcies having fallen in the course of the last 12 months, an estimated 70% of all insolvency cases in Denmark result in bankruptcy. What has shifted is the sector this is affecting. Throughout 2010 it was mostly real estate insolvency and those companies with speculative interests therein. However, since mid 2011 this has been on pause because as one partner explains, "a lot of intercreditor agreements had been reached and out of court restructurings completed. Why? Because the values in foresale you had expected were much lower, especially with the recession and there weren't too many buyers interested. Now we are seeing a marked shift towards other sectors such as windfarms, agriculture and shipping."

Danish banks are increasingly reluctant to file for bankruptcy for two reasons: they don't want to incur a loss and there is no point in going for the jugular when a company can survive without further credit. Banks are under a lot of pressure to avoid any conspicuous 'bit hits' to their balance sheets.

Also, as one partner explains, "companies are a little more back to normal and should be able to keep running. Previously the companies going bust had either management or owners who were crooks and it was all real estate."

There are still a lot of insolvency matters filed to court on behalf of the small businesses that don't have resources for restructuring, so the number of court driven mandates hasn't changed dramatically.

From April 2011 a new law for Rekonstruktion (re-organisation) was introduced which gave a company the option of either going bankrupt or selling off its core assets and coming to an arrangement with all the creditors. Lawyers say most were initially hesitant to use these new rules but by the "end of 2011 people started to become a lot braver and over winter we saw a big increase in petitions for reorganisation", according to one partner.

The process can take up to 11 months so the market will wait to see whether this proves a success. In the meantime everyone has one eye firmly fixed on the Eurozone as one lawyer says: "Confidence, that is what is needed. At the start of 2012 a lot of people were more optimistic, but this changes from month to month. Every other day there is more bad news from Europe and that makes things here very volatile. Maybe volatile is the new normal."

MAJOR LATERAL HIRES

Erik Malberg
From: Philip Law Firm
To: Bech-Bruun

Bjørn Wittrup
From: Philip Law Firm
To: Bech-Bruun

MAJOR LEGISLATION CHANGES

Amendments to the Danish Bankruptcy
Act
In effect as of April 2011