It was a catchy headline that, in some ways, summed up 2009 for infrastructure lawyers. “PPP has been a nice little earner . . . for the lawyers” declared the London Evening Standard in January, decrying the £500 million (€570 million; $772 million) in legal fees paid out on the embattled Tube Lines PPP.
However, in many instances it wasn’t exactly the kind of work and advice that indicated a healthy market.
For fund lawyers, a difficult fundraising climate and trouble among fund sponsors meant that in many cases the managers were calling for help with difficult tasks such as restructuring a fund or help with inking all the documentation for a hasty spinout.
For financing lawyers working with bidding teams on PPP projects, difficult credit markets transferred into huddle sessions on such quandaries as whether to pursue bank debt or bonds, how to replace a consortium member and on what terms, and whether to drop out or continue with the bidding.
For government advisers, the failures of several high-profile transactions undoubtedly led to some difficult discussions around what to do next and when and how to avoid a similar fate in the future.
To be sure, it hasn’t been all gloom and doom. Many deals did close, albeit – as with the Port of Miami Tunnel, where Nossaman, Florida’s legal adviser, blogged about a 45-month long procurement – they took longer and proved more difficult than anticipated. So it’s been a year that has tested, as never before, infrastructure lawyers’ ability to give good advice to clients in this young asset class when it matters most.
The range of advice clients demanded in 2009, everything from how to manage a spinout to how to salvage a troubled deal, has also reignited that prickly old debate: just where exactly does infrastructure fit within a legal adviser’s portfolio? Is it better to create a separate group called infrastructure, as Allen & Overy has done? Or is it better serviced from a project development and finance team, as with Shearman & Sterling? What about M&A and real estate? Or government affairs?
As 2009 demonstrated, the asset class requires a mix of expertise from all these areas and more. So as the pool of clients grows, so will, undoubtedly, dedicated resources within law firms – as well as the mix of international, national and, increasingly, regional firms looking to stake their claim in the asset class.
Case study: Filling the gap – George Miller, Mayer Brown
One notable example of law firms looking to expand their service capabilities in infrastructure was Mayer Brown’s hire of George Miller for its global projects, infrastructure and asset finance groups in September 2010.
Miller, previously a partner at law firm Simpson Thatcher & Bartlett, is a finance lawyer who represented senior bank lenders in the financing of the $1.6 billion I-595 highway project in Florida – the first infrastructure deal in the US market to use availability payments as a tool to repay investors.
“The gap in our infrastructure practice has been that we haven’t had a really strong financial person on the lenders’ financial side of deals. And George is as good as it gets,” Mayer Brown partner John Schmidt said at the time.
With California also looking to employ availability payments in its infrastructure projects, including the Presidio Parkway, other law firms are likely to see this kind of expertise as ‘must-have’ in future.