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

During Ireland's prolonged financial crisis the country's so-called 'big six' law firms have managed to keep fairly busy, advising on the raft of work resulting from the collapse of the financial system. However, for many smaller firms the picture has not been quite so rosy....

During Ireland's prolonged financial crisis the country's so-called 'big six' law firms have managed to keep fairly busy, advising on the raft of work resulting from the collapse of the financial system.

However, for many smaller firms the picture has not been quite so rosy. Particularly for practices specialising in property, the work has practically dried up. Couple this with a steep rise in professional indemnity insurance (PII) costs and the future for much of the Irish legal profession is uncertain.

In addition, what was previously a fairly closed market has opened up in recent years with firms from outside the country looking at potential opportunities. Maples and Calder started this movement but more recently fellow offshore firm Walkers has opened in Dublin. The firm has already started to make more of an impact on the market with some big name clients in aviation finance including advising aircraft owners, airlines, asset financiers and leasers. US firm Dechert has also recently joined the fray hoping to gain inroads thanks to its reputation in funds work.

In August 2012, William Fry announced they are opening an office in the City of London.

CONTEXT AND TRENDS
Over the last 12 months the banking departments of the major Irish law firms have been primarily occupied with work in three areas; debt restructuring (renewing facilities for healthy borrowers as well as distressed work), deposit book transfers and Nama (National Asset Management Agency) related work. Some describe this as a "steady build" while another partner says "there's been an incredible surge since the end of 2011"....

CONTEXT AND TRENDS

Over the last 12 months the banking departments of the major Irish law firms have been primarily occupied with work in three areas; debt restructuring (renewing facilities for healthy borrowers as well as distressed work), deposit book transfers and Nama (National Asset Management Agency) related work. Some describe this as a "steady build" while another partner says "there's been an incredible surge since the end of 2011".

So what has changed? The bread and butter debt restructuring is still coming off the back of the crisis and banks are increasing loan portfolio sales as the direct result of EU/IMF pressure to deleverage. "The clock is ticking down on bailout terms and banks need to dispose," explains one lawyer.

The position of Nama has also altered over the last year. "Crisis management has now moved into asset management. Now we have better visibility of their (Nama) position" says one partner. "Nama is now making money, developing itself and providing finance. This is throwing up a lot of banking work as it effectively acts as a lender both on its own and with property firms coming to Ireland."

By 31 December 2011 Nama had acquired all the eligible assets under its initial strategy, the five participating institutions have been consolidated to three (AIB, BOI and IBRC) following the transfer of the EBS (to AIB) and INBS (to IBRC). As a result the period saw increased activity in assets sales by Nama and consequently financings for some of those assets.

In stark contrast there hasn't been growth in the standard banking market in straight lending, with one partner remarking: "Banking is now a cross-departmental game, in particular involving restructuring. The focus for firms has to be on diversification and the only banking that does exist is highly complex work involving detailed structures. There's not much plain vanilla out there."

However there is optimism from many that a pickup in bank lending is imminent with one partner saying, "Since the crisis, so far as banks are concerned they got the capital that should defrost paralysis of general lending which we should see go up by the end of 2012 and into 2013." In addition a more stabilised financial environment will also help. "Reputational issues are further down on the agenda. The nervousness that would have been there 12 months ago has dissipated," says one partner. While this recovery is playing out against the backdrop of the Eurozone crisis, practitioners take heart from Ireland's position in comparison to some of its Eurozone neighbours. "A large part of recovery in the market has to do with Europe. Irish banks are about 18 months ahead of Spain," says one partner and another agrees: "We are two years ahead of Spain in terms of remediation. There's still work to be done but the heavy lifting has been done."

In terms of new money investment, for the first time in a while there has been interest from China in areas such as aircraft leasing thanks to favourable Irish structures and a sophisticated tax treaty network. "China has a huge amount of capital to support its banks,' says one partner.

In project finance the picture is bleaker: "Large infrastructure deals [have been] cancelled," says one partner. "If other firms say they are doing PPP (public-private partnership) it's not true, none closed in 2011." While some predict that the market is returning and there is undoubtedly still a need for key infrastructure, at the present time things are moving slowly. One chink of light is the proposed involvement of infrastructure funds, which in a similar way to PPPs will see projects financed and constructed in partnership with the private sector.

MAJOR LEGISLATION CHANGES

The Central Bank of Ireland's Fitness and Probity Standards
December 2011

CONTEXT AND TRENDS
Ireland is experiencing an upward turn in its credit strength and some stability is returning to the capital markets but confidence remains fragile with hopes hanging on the fate of the Eurozone. In ECM (equity capital markets) things remain stagnant with the market still characteristically stressed....

CONTEXT AND TRENDS

Ireland is experiencing an upward turn in its credit strength and some stability is returning to the capital markets but confidence remains fragile with hopes hanging on the fate of the Eurozone.

In ECM (equity capital markets) things remain stagnant with the market still characteristically stressed. "There's still an absence of domestic issuances and a lot of concern. It's still very rare to be making a 'Euro dominant' deal" explains one lawyer.

On the debt side, after being locked out of international markets since 2010, Dublin returned to international bond markets in June 2012 with the sale of a five-year bond. According to one partner "with this and possible sovereign annuity bonds we could see the bond market bouncing back soon".

Experts point to the Irish debt securities association set up in May 2012 as a positive sign. The lobby group is expected to encourage investment. Nonetheless, market commentators note there have been very few 'real bond issuances', with the exception of the Bank of Ireland. Debt work is subdued and as one lawyer pointed out "we are very busy, but with trouble, rather than creating new products, it's all debt restructuring resolutions".

The market has seen a few US private placements from the larger Irish corporates mainly from insurance companies and opportunistic funds. This high risk work has forced a change in the borrower group as one partner explains: "The traditional types of deals like CLOs and asset backed securities: that market is dormant because of regulatory concerns and is contingent on when the European authorities get the landscape ready. So many are doing private placement deals involving distressed assets. This is starting to gather pace through Nama (National Asset Management Agency) and there's been a steady flow of securitisation insurance risk."

Another partner explains that, "prior to 2011, everyone was waiting but now the deals are beginning to flow. Nama are packaging up €2 billion [in assets] to sell from the Irish market. "In 2011 we started to see a return to the market of pre-packed securitisations after a two year hiatus, But CLOs are still not back, apart from on a private basis. European activity is still not back. There is particular activity on the more bespoke side."

A bright spot remains aircraft finance, which has retained levels of activity and there is also optimism about work arising from a more innovative securitisation landscape as one partner explains: "There is still the expectation of re-packaging. Domestic banks assume they will sell large tranches of loan portfolios but worry that not as much interest will be seen due to the quality of the assets, it is not as simple as selling straight loans – they will have to be more innovative with securitisation structures to attract buyers at the prices they want."

In addition a new area of growth is the commodity bond: "Capital markets issuance for investors who like to keep their money under the bed," says one partner. "Gold is a big one. A number of interesting instruments are being created in the commodity bond area."

Firms are even seeing work emerging from Ireland's distressed Eurozone neighbours: "A relatively new trend lies in the interest from distressed European banks in using Irish special purpose vehicles (SPVs)," explains one partner. "Especially from Spanish banks who are setting up a new company (vehicle) for each deal. They want our favourable tax regime and a company in Ireland is easy to set up, run and list on the Irish Stock Exchange."

CONTEXT AND TRENDS
Firms have beefed up the manpower of their regulatory groups since the Central Bank became the single unified regulator in respect of all financial services. The enforcement divisions are increasingly active, using their range of additional powers, which were previously limited to the withdrawal of licences, a drastic and heavy-handed measure for the more minor breach....

CONTEXT AND TRENDS

Firms have beefed up the manpower of their regulatory groups since the Central Bank became the single unified regulator in respect of all financial services. The enforcement divisions are increasingly active, using their range of additional powers, which were previously limited to the withdrawal of licences, a drastic and heavy-handed measure for the more minor breach. Now they can impose a series of measures.

Firms are seeing their work being tied in closer to transactions as opposed to being separate mandates as they had before. "Flavour for the work is advisory, transactional and project based. Before it was 80% advisory. Now it's more transactional work," confirms one partner.

Enforcement and litigation work has also increased in line with tougher and tighter regulatory controls. "The restructured and expanded role of the regulator of banking and financial services in the Central Bank of Ireland has increased the focus on regulation to ensure that in the future, all regulated financial entities – whether banks, insurance companies, investment firms, intermediaries and similar entities – are rigorously supervised to ensure that business is conducted in a fully-compliant and prudent manner," says one partner.

On the legislative front both the Credit Institutions (Stabilisation) Act 2010 – which was signed in reaction to the Irish banking crisis – and the enhanced capital requirements demanded by the Irish Central Bank under its Prudential Capital Assessment Review (PCAR), are generating work for firms as they assist financial institutions in their restructuring.

CONTEXT AND TRENDS
Ireland like all other investment fund focused jurisdictions has had to consider the impact of the AIFMD (Alternative Investment Fund Manager's Directive), which is to be introduced next year. The directive regulates fund managers selling their funds into the EU and fund managers have been seeking advice as to their new status under it....

CONTEXT AND TRENDS

Ireland like all other investment fund focused jurisdictions has had to consider the impact of the AIFMD (Alternative Investment Fund Manager's Directive), which is to be introduced next year. The directive regulates fund managers selling their funds into the EU and fund managers have been seeking advice as to their new status under it. Ireland, as a member of the EU and a fairly highly regulated jurisdiction has not been too out of step with the new rules and managers based there have generally only sought clarification on the new rules. "Irish fund procedure already fits the AIFM regime model – coming in," points out one partner. "Unlike offshore it is fully regulated."

Looking at the market as a whole, practitioners report that a lot of their work is taken up by restructuring, with new fund launches still considerably lower than pre-crisis levels. "New set-ups aren't as active as the last few years," admits one partner. "Managers were unable to deliver particularly high returns therefore investors are sticking to more liquid products."

If one was to look at standard fund models, the three most common are UCITS (Undertakings for Collective Investment in Transferable Securities), QIFs (qualified investor funds) and ETFs (exchange tradeable funds). Most firms in the market have business across all three structures. In the case of UCITS, partners report that the new rules (UCITS IV) are not proving problematic for issuers and have in the words of one partner "bedded down". ETFs are picking up and are becoming more and more prevalent thanks to the greater regulation they have to comply with, an aspect which gives investors confidence: "There is a flood towards money market and exchange traded funds (ETFs) because of the safety aspect," says one partner.

In terms of sectors, practitioners report a steady rise in real estate and private equity: "A lot of interest in real estate – asset management funds – distressed loan portfolios/ non-performing loans. This is where we see a lot of opportunity over the next year to 18 months," says one funds lawyer.

Investment and new fund clients where they are being seen are being reported from far and wide. "More Asian managers looking to set up in Ireland," says one partner. "Luxembourg- would historically have been the domicile of choice for Asian managers."

Another partner adds that "another friend is South America because of the size of the pension pools. Chilean pension funds can invest assets in non-Chilean asset funds".

Finally, it is worth noting that the legal market itself has become increasingly competitive in the last few years, with a number of offshore firms – including the now well established Maples and Calder and the new boys Walkers – entering the market and competing with local Irish outfits. "There is competition in Ireland with the new firms looking to gain market share," says one partner.

RISING STARS

A&L Goodbody
Niamh Ryan

Dillon Eustace
Brian Higgins

Maples and Calder
Paul Dobbyn

CONTEXT AND TRENDS
The general feeling in the Irish M&A market is one of cautious optimism. Firms are seeing new deals coming into market, an increased interest from external investors and an increased availability of credit from Irish and international banks....

CONTEXT AND TRENDS

The general feeling in the Irish M&A market is one of cautious optimism. Firms are seeing new deals coming into market, an increased interest from external investors and an increased availability of credit from Irish and international banks. "Last year 75% of deals were in restructuring whether voluntary or forced, now it's about 50/50," says one partner.

The return of liquidity has proved the catalyst in a market where, because of the financial crisis, there are plenty of assets distressed or otherwise to be had. "Irish banks have made available credit, some more bullish than others, Bank of Ireland and the International banks are lending which is a great opportunity to borrow or access funds now," says one partner. "There are more opportunities over the course of 2012 and into 2013 we will see a lot more deals and many more closing." The availability of funding is also changing the way that deals are being done. "We no longer have these highly leveraged deals that we were seeing a lot last year," explains one partner.

In terms of targets, there remains a great deal of interest in the assets to be had from the divestments made by the banks and Nama (National Asset Management Agency). "At the tail end of 2012 many predict they expect to see activity in the disposal of state assets as the government comes under increasing pressure from the Troika," says another corporate partner. Other also expect to see further consolidation in the financial services sector.

There is also plenty of work going in regard to the sale of loan portfolios by the major banks and most firms have reported activity in this area over the last year. "There have already been some hedge funds buying up property secured loans," says another M&A specialist.

In terms of buyers, as well as interest domestically and from the UK, firms also report interest from Asian investors. "China is signing off some major deals and there has been a lot of interest from India over the last 12 months," says one partner.

MAJOR LATERAL HIRES

Dominic Conlon
From: A&L Goodbody
To: Walkers

RISING STARS

Matheson Ormsby Prentice
George Brady

CONTEXT AND TRENDS
The biggest change in the restructuring and insolvency area relates to Ireland's Personal Insolvency Bill and its proposed dramatic reduction of the maximum bankruptcy term from 12 to 3 years. The State's prediction is that this will increase the number of filings from roughly 30 a year as it stands to now to 3,000....

CONTEXT AND TRENDS

The biggest change in the restructuring and insolvency area relates to Ireland's Personal Insolvency Bill and its proposed dramatic reduction of the maximum bankruptcy term from 12 to 3 years. The State's prediction is that this will increase the number of filings from roughly 30 a year as it stands to now to 3,000. The reasoning behind the move is clear, to encourage business to take action when they hit a distressed situation instead of sticking their heads in the sand because of the draconian punishment formally meted out to failed businesses.

In addition there is also a proposition to introduce a non-judicial route for corporates to restructure and tackle their debts. Again this is designed to add more flexibility to the system and allow some issues to be tackled outside of court.

A procedure unique to Ireland, examinership is a rescue process designed to help businesses recover from insolvency and it remains a key source of work for many firms: "There's a high level combination of two types of restructuring case. You have the big ticket Irish corporates – these are the very large debt restructurings – all the big firms are involved in these. Then you have the uniquely Irish predicament of examinership," says one partner.

Elsewhere, personal insolvency law reforms have the potential to completely alter the landscape in this area and stabilise the situation. "At the moment there is almost a phoney war going on," explains one partner. "Banks are refusing to write off individuals with high debt. It's seen as a political hot potato and would anger people forced to pay off their mortgages."

The law firm landscape is also changing. "There are more formal panels. All banks now have them, which has driven the prices down," explains one partner. "There is more pressure on firm's profit margins. But it is not a race to the bottom, many firms are becoming more careful about how they manage their practice." In addition firms are putting on a lot more in-house lectures/workshops to add value. "Price pressure can sometimes lead to a rush to the bottom but I think the cream will rise to the top," says one restructuring partner. "It's a good thing there is discipline on cost and added value.

MAJOR LEGISLATION CHANGES

Personal Insolvency Bill
Pending