2 December 2015.
By Will Foulkes.
A DAY AS A TRAINEE
2 December 2015.
So what is it actually like to work in one of these firms as a trainee? Firstly, I hope it goes without saying that the experience differs widely from firm to firm and even from department to department within the firms. Factors that contribute significantly to differences include the size of the team, the time sensitive nature of the work that is being done, the nature of the clients (big conglomerates or individuals), size of the office and so on. The following is a glimpse of a day working as part of a team in a large international law firm on a cross border transaction in the finance department.
• This account is entirely fictional. Any resemblance to a real life party or transaction is purely coincidental.
You have just started as a trainee in the banking department of an international law firm. Last night at 8 pm you had an email from your supervisor saying that a new deal had just come in and he wants you to be involved as it will have some interesting aspects that you have not seen yet that will contribute well to your experience. All you are told is that it looks like it could take off quickly so you need to be prepared to push back on other work and to make sure that you clear any other demands on your time by other associates with him first.
You arrive in the office at 9 and your supervisor is already at his desk. He asks you to get settled and that he will give you the rundown in half an hour. You check your emails, there are already a few requests for your assistance on other matters and asking for updates. You reply that you cannot take on anything new and for your existing work you check to see if anything urgent needs doing. Nothing. Next up, stationery cupboard for a new notebook for this deal. One of your first lessons in the banking department was to keep notes for all your different transactions separate. This is important both for organisational purposes and also for confidentiality if you are ever at the client. Mainly though it is organisational, when you need something, you don’t have to go looking through pages of different notes for different matters.
At 9.30 you close the door and your supervisor begins the briefing. It is going to be a cross jurisdictional restructuring of a multinational company and there will be several refinancings taking place. You will need to review old loan agreements to check transfer provisions and help run the new financings. Your supervisor will be tied up with negotiating the new loan agreements and intercreditor agreement so your job will be to run the conditions precedent checklist and to ensure that the ancillary documents are negotiated in our client’s favour and everything gets signed that needs to be.
• Conditions precedent are documents that need to be agreed and signed before any drawdown can be made on the loan, so they are very important.
There will be another meeting that afternoon with the corporate department who will be running the restructuring side, but before then you have time to review the old loan agreements that you can pull from the old deal bibles.
• A deal bible is a binder of all the documents on any given transaction, and for a financing will typically include the loan agreement, board minutes authorizing the company to enter into the financing, legal opinions, intercreditor agreement, security documents, confidentiality agreement (if separate) and any other corporate documents such as a share purchase agreement in the event of an acquisition being part of the transaction.
Your supervisor gives you the old bibles and tells you to look for any provisions that would restrict transfers of the old loans to new entities. As part of the restructuring there will be new subsidiaries created, sometimes in other countries and ideally you would just transfer the existing financing agreements to these new entities. However, there might be restrictions on the transfer that mean that the financing terminates on a transfer, or else that an event is triggered which gives the banks the right to terminate. Obviously this is something you would want to avoid, so it is important that you know up front if there will be any issues. Another thing you can do right away is to order company searches to be carried out. These are investigative searches that give you a report based on what is registered at Companies House, the central database of companies in the UK. This will allow you to check that the previous financings were correctly approved and basic things such as the companies still being run as going concerns (i.e. none of the entities you are dealing with have been made dormant or dissolved). These typically take a couple of days to come back so it is best to order them now.
Next up you can start to create the conditions precedent checklist. This will contain all the names of the documents that need to be created and signed and will allow you and the other legal teams to monitor their status during the lifecycle of the transaction. For now you can base it on what was done before for the financings in anticipation that a similar structure will be used this time. If there are changes to be made they can be made in due course.
1pm. It’s lunch time, and you check with your supervisor if now is an good time to grab a bite. This is not because your supervisor controls your every move, but because he might know if there is a call about to happen that you are not aware of. He says it’s ok, because the next thing is still the meeting with corporate in a couple of hours, but to keep an eye on your Blackberry.
You head down to the canteen and just as you sit down to eat, the little red light on your Blackberry lights up. It’s your supervisor telling you that the client has discovered something that they need advice on straight away. He wants you there when he calls them. You grab a take-away box and head back upstairs.
Your supervisor is waiting and calls the client on speakerphone. The client has a question about an entity in Luxembourg that you are not able to answer, so you call your contact at the Luxembourg office and bring them onto the call. It turns out that one of the entities is cashflow insolvent and they want to know if this will affect the ability of the group to refinance. They are panicking and it is your supervisor’s job to calm them down and explain that there will be a solution.
After the call, you get back to reviewing your loan agreements. You see that indeed for a couple of them a transfer of ownership of the borrower can lead to an event of default, that is, it could mean that the bank could ask for the loan to be repaid. This would be a disaster, so it is great that you have spotted it. Rather than run to your supervisor straight away, you continue with your review and gather all your results into a table.
Half an hour before your meeting with the corporate team, you discuss your findings with your supervisor so that you are both on the same page before the meeting.
It is 3pm and time to head down to a meeting room to see the corporate team. You will also be speaking with your offices in several other countries who have all been given dial-in instructions and will be part of the conference call. As this is a London deal, and primarily a corporate affair, the London corporate partner will be leading the call and you are there just to give supporting input on the financing.
Once you arrive, coffee and biscuits have already been ordered, and you take your place at the long conference table. There are starfish shaped conference call telephones in the room and microphones hanging down from the ceiling so everyone can be heard. You will not be required to speak and instead will be there to make sure that you understand the context that everything is happening in.
One by one people join the call, until all of the legal team is assembled and there is lots of chatter as people catch up. Then the client joins, the joking stops and everyone becomes serious. It quickly becomes apparent that the client is in trouble financially and that the restructuring is a last ditch effort to stay solvent. They will be selling off some entities that are less profitable and streamlining their business. They want to know if they will be able to borrow more money, especially as their credit rating is soon to be downgraded.
The question comes to your supervisor and he deflects it by saying that there will need to be a call with the syndicate of lenders. The truth is that their credit rating being downgraded is a trigger under the financing agreements and would breach one of the clauses (called a covenant). This means that the banks would need to be informed anyway, so a call with them is unavoidable. Your supervisor will need to think how best to present what is happening so that your client is not left without financing as a result. This is where the commercial awareness comes in and the ability to give commercial, not just legal, advice is vital. A true understanding of the client’s business and the market that it operates in, is necessary to allow you to be able to negotiate on its behalf with the lenders.
After the corporate team have discussed more about how the company would like to restructure, which entities will be dissolved and which will continue, and any various restrictions and local law requirements with our different offices the meeting adjourns and you head back upstairs.
It’s already 5pm. So you continue and finalise your review of the loan agreements and present your findings in a table. After that you continue to create the conditions precedent tables for the different loan agreements, now including the fact that some of the entities will be dissolved and so their financing agreements will have to be transferred.
Once this table is complete you send it to the trainee working for the lender’s lawyers and check if he has anything else to add. As this is the first time you are speaking you introduce yourself as well.
7pm and that is it for the day, there is a lot more still to do, but as we are not driving this deal and have to wait for more input from the corporate team you can go home.