The burgeoning development of the US bank capital relief trade (CRT) market has been one of the major talking points of the sector in 2020 – perhaps the major talking point – and Clifford Chance has been at the forefront of this business.
This coming of age of the US CRT market has been talked of for several years and, though there have been several false starts, 2020 seems to be the year when it has all come together. Several factors have coalesced to make this possible, most notably regulatory benevolence and the extent to which the Covid-19 lockdown has underlined the importance of sufficient capital adequacy.
Though some banks have had experience in the sector, others have been less experienced. Yet for the more experienced and for the less experienced, Clifford Chance has been on hand to pilot issuers through the shoals and past the reefs.
It has represented two of the three largest issuers in the US CRT market in 2020 – which have been Goldman Sachs, Citigroup and JP Morgan - and it is for its unrivalled legal footprint and expertise in this sector that it has been selected as SCI’s North American Law Firm of the Year.
JPMorgan has made most of the headlines, with its breakthrough mortgage securitisation of 2019 securing regulatory approval in February and several new CRT transactions following that throughout the year, including its first auto loan securitisation in 14 years in August. Goldman Sachs issued two CLNs worth US$184.8m in September, later repacked as pass-throughs, while Citi - one of the stalwarts of the US market - has continued to be active below the radar screen.
Though Clifford Chance was unable to confirm which two of these three it represented, it is clearly at the heart of the matter. In addition to its instrumental role in opening the market for US domestic issuers, the firm has represented foreign issuers, arrangers and investors in the US market for more than two decades and has been at the forefront of the development of many of the practices that allow global CRT issuers to reach US investors and investment managers.
The firm set itself the target of being the go-to practice for any bank contemplating CRT issuance in the US and, after 2020, it is hard to argue that it has not succeeded in this respect. It has a highly respected and experienced New York practice, headed by partners Gareth Old and David Felsenthal.
Felsenthal graduated from Princeton and Harvard law school, and started work at the Federal Reserve. He joined Clifford Chance in 1992, becoming a partner in 1997.
Old brings a wealth of international experience, having started his career with Clifford Chance in London in 1997, before moving to Hong Kong and Frankfurt and then to the New York office in 2004.
“We are delighted and honoured to have won this award from SCI, which reflects the fact that Clifford Chance is able to bring the strength in depth and expertise we possess in CRT markets around the globe to the North American market,” says Felsenthal.
The Clifford Chance CRT team is anchored by partners Jessica Littlewood and Timothy Cleary in London, both well-known and highly respected names in the industry. The firm’s global CRT team includes key partners in Madrid, Frankfurt, Luxembourg, Hong Kong, Singapore, Brussels, Amsterdam, Milan, Paris and Tokyo as well.
Clifford Chance’s expertise covers the full range of CRT securitisation, from the use of an SPV acting as protection seller and note issuer to bilateral transactions between originator and investor, either in the form of a CDS, financial guarantee or credit insurance policy.
Clearly, in this world, staying abreast of key regulatory developments could not be more important, and no law firm is in closer touch with regulatory thinking or more cognisant of the import of all current and pending rules than Clifford Chance.
In short, few law practices possess the strength in depth across global CRT markets than Clifford Chance, but the fact that it has been the advisor to two-thirds of the banks active in the North American market means it has at the moment few significant rivals in this jurisdiction.
Honourable mention: Mayer Brown
Any US issuer bent on a capital relief trade offering is sure to encounter the name of Mayer Brown sooner or later. The premier US law practice has been at the forefront of the synthetic securitisation market for a number of years, in Europe as well as the US.
In fact, Mayer Brown is the firm that can offer cutting-edge advice and guidance to borrowers which need to comply with both US and EU laws as part of the same transaction. It has well-respected partners in both London and New York to provide the necessary hand-holding to, for example, European banks wishing to bring CRT deals in the US to cover obligations of North American subsidiaries.
It is also very well-placed to capitalise on the predicted boom of the CRT market in the US, not only from European borrowers but from US names as well.
For complete coverage of SCI’s 2020 CRT Awards, click here.-