IFLR European In-house Counsel Summit: the highlights

Author: IFLR Correspondent | Published: 24 Jan 2014
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Capital markets: debt and equity developments

  • Convergence in high yield and emerging market debt transactions should open a new market for European issuers this year;
  • As record volumes in European debt capital markets continue into 2014, so too has the availability of funding options increased. But growth in markets and products has also provoked increasing complexity in transactional structures;
  • Early-stage preparation should help deal teams to handle procedural technicalities and counter interest rate volatility in the year ahead;
  • Confidence and breadth of product offerings is also returning to EU equity capital markets. The need/demand for pilot fishing or early-stage marketing might reduce as a result.

M&A and private equity issues

  • A liquid financing market, corporates’ large cash reserves, and private equity funds’ significant dry powder means M&A should be buoyant in 2014;
  • All of these factors existed last year, but they weren’t capitalised on due to buyer-seller price expectation gaps;
  • The popularity of private debt funds is set to continue, funding borrowers too small to tap the European HY market or US loan market;
  • Combined offerings from private debt funds and banks is encouraging familiarity and comfort with new forms of finance;
  • The acceptability of warranty & indemnity insurance continues to grow.

Restructuring: managing your company’s liabilities

  • The UK is increasingly becoming a universal restructuring hub, with companies outside of Europe now utilising schemes of arrangement, company voluntary arrangements, and pre-pack administrations;
  • Last year’s Magyar case further expanded the range of companies that can take advantage of UK restructuring schemes. The High Court approved the scheme of arrangement notwithstanding the fact it was incorporated in the Netherlands, its main business servicers were in Hungary, and its debt was governed by New York law;
  • Aviation is one industry not affected by forum shopping, as carriers are likely to receive more favourable treatment by a national court;
  • Last year’s rulings in Saltri and Torre reveal that limitations on an agent/trustee’s duties agreed in the documents are absolute. A court is unlikely to impose additional duties not set out in the contract.

Corporate governance management

  • At the end of 2013,a new regime for disclosures in company reports accounts was introduced in the UK;
  • One panellist noted the tendency to insert requirements for additional information in this regime, particularly around the remuneration report requirements, environmental data and people data;
  • In 2013, London’s market regulator, the Financial Conduct Authority released proposed new rules designed to enhance the effectiveness of London’s listing regime and strengthen protections for minority shareholders;
  • But the relationship agreement proposals under these rules do not seem to offer any real sanctions for non-compliance;
  • The issue of anti-corruption and anti-bribery best practice has remained at the forefront of corporate agendas. Third parties, particularly when subsidiaries are involved, remain a major area of concern.

Offshore possibilities

  • There is a thriving market in deals that include an offshore element, with average deal-size growing;
  • The Channel Islands and the Caribbean are characterised by different regulatory paradigms. In the latter, regulators are more interested in the substance of the transaction;
  • The offshore split between share capital and share premium means that extracting money from a Cayman company is relatively easy;
  • Offshore structures also benefit from the concept of statutory mergers. This mechanism allows for a transfer of assets without a transfer taking place from the perspective of a tax analysis.