Economic and regulatory changes have sparked renewed activity in debt and other distressed-asset sales by financial institutions, particularly in Europe. We expect that Basel III/CRD IV and other regulatory pressures will drive European financial institutions to contemplate divestitures in Europe, the United States and other jurisdictions.
Purchasers of bank portfolios and businesses need to address the risks posed by the acquisition of these new business units or large portfolios of troubled loans and securities, especially in the commercial and residential real estate sectors.
For the bank sellers, the choice of strategies depends largely on competing objectives, including elimination of risk associated with the assets; retention of customer relationships; avoidance of loss recognition; preservation of tax benefits; timing; and regulatory, investor and political considerations. Evaluation and implementation of an appropriate strategy require a multidisciplinary approach to the many legal issues involved.
Depending on the circumstances and objectives, a variety of potential solutions are available, including the creation of “good bank-bad bank” structures, seller-financed asset dispositions and the use of credit derivatives that allow an investor to track the risk on a specific pool of assets, and not the general credit risk of the party holding those assets.
Mayer Brown has a significant track record of advising buyers and sellers of financial institution business units, as well as portfolio investments in, and the activities of, distressed financial institutions. This includes advising clients on the issues of risk, liquidity and equity control, as well as on the sale of the assets themselves.
We offer our clients a team of lawyers and other professionals with the knowledge, experience and judgment to handle all of the legal and regulatory aspects affecting these transactions. We understand the unusual, and often subtle, issues that arise in these matters and so are able to work effectively with financial institutions, their officers, directors, shareholders, investors and regulators in addressing and successfully resolving these challenges.
We are also recognized as one of the leading law firms in the European distressed debt and nonperforming loans ("NPL") market. We regularly represent sellers and buyers in major NPL transactions as well as in their day-to-day trading activities. Documents created by our firm have established market standards, particularly in Germany, and are indirectly used by a variety of participants.
In addition, our restructuring team provides comprehensive bankruptcy and realization analyses with regard to distressed loans in acquired portfolios, including commercial real estate loans. Our extensive experience representing private equity, real estate and hedge funds also gives us insight as to the needs and goals of both fund managers and institutional investors.
Our experience includes the financing of NPL transactions via leveraged loans and securitizations. More information on our debt trading practice can be found here.