SCI MM CLO Awards: Law Firm of the Year

SCI MM CLO Awards: Law Firm of the Year

Thursday 24 November 2022 17:40 London/ 12.40 New York/ 01.40 (+ 1 day) Tokyo

Winner: Allen & Overy

Allen & Overy wins Law Firm of the Year in this year’s SCI Middle Market CLO Awards, as the practice is recognised for its accomplishments as a leading legal advisor in the MM CLO sector. Allen & Overy boasts a renowned team, well placed to offer advice on a wide range of sophisticated securitisation transactions and which possesses extensive CLO expertise.

Allen & Overy has received abundant praise for its MM CLO practice. The practice focuses on representing underwriters, asset managers, administrative agents and debt and equity investors in CLOs, with clear expertise on the middle market sector. It acts as a central partner to leading investment banks and collateral managers in the public widely distributed and private MM CLO space, representing lenders and borrowers in structured loan facilities, CLO warehouse facilities, risk retention financings and a variety of other asset backed securities transactions. Sitting within the wider structured finance practice, the team is widely recognised by commentators and industry leaders as a dominant force in the industry.

“A fundamental aspect which differentiates Allen & Overy in this market is that we act equally vigorously for both arrangers and managers,” notes partner Lawrence Berkovich. “This gives us a more comprehensive market understanding to arrive at a compromise that is beneficial to all parties.”

Such vision and value is further emphasised by partner Nicholas Robinson: “We take a broad view of the market, both from both the bank and manager’s side and also from the perspective of advising parties to securities issuances in the capital markets and in the private structured loan markets. We aim to strike a balance between strongly advocating for our clients and also being attuned to the commercial drivers in a deal in our understanding of all parties.”

Looking back at the past twelve months and its defining moments, the team highlights its comprehensive approach and market authority on EU risk retention compliance matters.

“There is not a particular or specific deal I would highlight,” views Robinson. “A significant number of our clients are leading European financial institutions, therefore we advise on deals which have to comply with EU securitisation regulations. To be able to truly be on top of those developments and leading the market on such aspects is clearly a highlight for us.”

He adds: “We have also been focusing extensively on warehouse lending and long-term financings. We formulate a certain flexibility for the managers to operate in the current environment and which is acceptable to the bank’s credit.”

Despite the turbulent macroeconomic backdrop and uncertainty hampering capital markets, steady appetite from CLOs has meant that volatility in this segment of market has been less pronounced. With demand for private debt running high, direct lending is becoming increasingly more competitive.

"Given the current environment, traditional banks are tightening up their lending to middle market companies and alternative direct lenders see an opportunity to further expand their market share,” notes Berkovich.  “One of the reasons we are particularly keen to participate and be so involved in this market is to partner with direct lenders in helping them take advantage of such opportunities because most MM CLOs are not arbitrage vehicles, but products designed to help direct lenders finance their business.”

Robinson further expands on this trend: “We are clearly experiencing a move to private credit deals. From a private credit perspective, there are still a lot of healthy sectors where you can look to develop businesses. And with less LBO activity given the current market constraints, direct lenders are looking to use CLOs to leverage their portfolios.”

Unsurprisingly, the outlook for the coming year is uncertain as loans and structures will experience idiosyncratic stresses from the current challenges of rising rates and geopolitical conflict. However, given MM CLOs are a financing product, such a stressful environment is likely to accelerate consolidation of private-credit lenders and MM CLO managers. In what are challenging times, the MM CLO market could experience fewer headwinds than other asset classes.

Berkovich concludes: “Generally the number of new BSL CLOs has been stable, however what is interesting to me is that we are receiving on our desk just as many new MM CLO and structured loan facility mandates. This suggests that private-credit lenders have already begun to take advantage of new opportunities.”

For the full list of winners in this year’s SCI Middle Market CLO Awards click here.