Banking & finance annual report
Feeling edgy
Brexit dealt a blow to banking and
finance lawyers as investors got
nervous, and this uncertainty looks
set to continue – however, this
problem will be partly offset by a
new wave of foreign investors and
direct lenders that are targeting the
Iberian market
Banking and finance lawyers
claim that, in general, the market
is improving and that there are
currently good opportunities for
law firms. However, it’s not all been
plain sailing. Brexit, in particular,
had the effect of unsettling investors,
and a number of lawyers in Spain
report that the flow of deals slowed
as businesses’ took time to digest
the implications of the UK’s historic
referendum. Though investment
activity picked up again in the latter
part of 2016, the UK government’s
recent invoking of Article 50
– which begins the process of
withdrawing from the European
Union – could mean that deals
start stalling once again, lawyers
warn. That said, it’s not all doom
and gloom – institutional investors
are targeting Spanish assets, while
there is also high demand for
legal services from construction
companies seeking to refinance
debt. In addition, an array of non-
traditional lenders are also currently
looking for business in Spain.
Meanwhile, in Portugal, banks
are frantically trying to clear up
their balance sheets – there is a
consequently a massive amount
of non-performing loan portfolios,
for example, that need to be
shifted and this is an area that is
providing rich pickings for lawyers
in Lisbon. Meanwhile, new players
are entering the market as the
country’s banks pass into foreign
ownership. In addition, shadow
banking – specifically, lending by
private equity funds and insurance
companies – is on the increase.
Deal flow was affected by the
Brexit vote last year, says Allen &
Overy partner Ignacio Ruiz-Camara.
“There was a slowdown for a couple
of months,” he adds. Despite this,
Ruiz-Camara says it was a busy year
in which a wide range of financing
options came to market, with project
bond structures being “particularly
successful”. He adds that there were
www.iberianlawyer.com
also a significant number of sales of
non-performing loans.
Volatile market
According to one partner, 2017 has
been “somewhat uncertain and
volatile”. He adds that, though deals
continue to flow, there is a degree of
political uncertainty – the partner,
who works in the Madrid office
of a ‘Magic Circle’ firm, expresses
some doubt that Brexit will “actually
happen”, despite the UK’s invoking
of Article 50, which begins the
formal process of withdrawal from
the European Union. He continues:
“For investment bankers in London,
it’s business as usual.”
One of the most significant
developments in the last year has
been banks offering more friendly
terms for borrowers says one
partner. “Banking deals now have
terms that are more appropriate for
borrowers,” she says. Meanwhile,
Uría Menéndez partner Ángel
Pérez López says the traditional
banks are now facing significantly
more competition “not only among
themselves but also with some
direct lenders as well as the capital
markets”. Pérez López also says
that Spanish real estate investment
trusts, SOCIMIS [Sociedades
Anónimas Cotizadas de Inversión
en el Mercado Inmobiliario], are the
most active players in real estate
financing, acquiring commercial
real estate such as shopping malls,
office buildings and hotels. In
addition, distressed M&A deals
are also generating significant
work for banking lawyers, as are
sales of non-performing loans. In
this regard, Pérez López says the
volume of transactions involving
secured non-performing loans now
exceeds that involving unsecured
non-performing loans. He adds that
2017 is expected to be a “very active
year for distressed M&A due to new
banking regulations on risk policies
and loss allowances, which will be
effective on 1 January 2018 and will
foster plenty of divestments before
that date.”
There is currently a massive
amount of liquidity in the market,
according to Gómez-Acebo &
Pombo partner Rafael Aguilera. He
adds that Spanish credit funds have
entered the market in the last year,
as well as institutional investors,
to finance Spanish companies.
However, Aguilera adds that he is
pessimistic about Brexit: “There was
a slowdown of transactions due to
Brexit and my concern is that this
slowdown may return following the
UK’s invoking of Article 50.”
Considerable opportunities
for banking lawyers are being
generated in the construction sector
as construction companies look to
refinance their debt, lawyers say.
Meanwhile, Brexit could mean
that Spanish law is increasingly
used when drawing up contracts,
according to Cuatrecasas partner
Iñigo de Luisa. “Because of the
Brexit-related uncertainties, we
already see more reliance on
Spanish law with regard to finance
documentation,” he says. “There
March / April 2017 • IBERIAN LAWYER • 27
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