Sell Side

Disclosure Counsel In 3Q Mix

In the quarter when the Securities and Exchange Commission for the first time charged a state with securities fraud for failing to make certain disclosures to investors, data from Thomson Reuters shows that most changes in rankings of law firms occurred among disclosure counsel.

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The third quarter of 2010 also saw the SEC begin a series of field hearings into disclosure and other regulatory issues, and take steps toward establishing a specialized municipal and public pension-fund ­enforcement unit.

The hearings are led by ­commissioner Elisse Walter and expected to lead to recommendations for additional regulation, legislation and industry ­“best-practices” documents.

In the first nine months of 2010, 1,266 issues with a par value of $73.8 billion reported using disclosure counsel, up from 917 issues totaling $72.9 billion in the period in 2009.

Fulbright & Jaworski LLP, a Houston-headquartered international law firm with nearly 900 lawyers, captured a 20.2% market share in the third quarter.

It served as disclosure counsel on 27 issues in the quarter worth $4.8 billion, helping it place second year-to-date with 55 issues worth $5.3 billion, based on calculations giving equal credit to each firm.

Three major issues for the Texas Transportation Commission secured Fulbright’s rank — including two Build America Bond deals in July and September that together exceeded $2.3 billion. It also opined on a $900 million BAB borrowing in July for the Los Angeles ­Community College District.

“We have gotten involved in some pretty sizeable transactions,” said Robert Dransfield, who heads Fulbright’s public finance and administration department from Dallas. “Significant issuers that worked their way through the market in the first part of the year have now come to market, and that’s reflected in the statistics.”

Orrick, Herrington & Sutcliffe LLP continued to dominate disclosure counsel rankings year to date, with 22.4% share of the deals.

The international law firm, which operates 22 offices for business in more than 100 countries, participated on 102 issues from January through September worth $16.5 billion.

Less than one sixth of that volume came from deals in the most recent quarter, however, in which it ranked second on 21 issues worth $2.7 billion.

Kutak Rock LLP, a national law firm operating in 16 cities, was the third-ranked disclosure counsel with 90 deals worth $4.4 billion. It placed third in the first nine months of the year, up from 11th in the same period one year ago.

Washington-based Foster Pepper PLLC also made a significant leap, placing third in the last quarter and seventh so far in the year, versus a 32d ranking in the first three quarters of 2009. Foster Pepper to date participated in 31 deals worth $2.9 billion — about seven times the volume it worked on in the same period a year ago.

Elsewhere in the legal business, Orrick remained in the top spot as bond counsel.

The firm opined on 292 deals from January through September worth $29.4 billion, capturing 9.9% of the market. Its third-quarter activity included 85 deals totaling $5.1 billion, reflecting a 5.4% share of the market.

Orrick’s dominance was more keenly felt in the first quarter when it worked on $16.2 billion of deals for a 15.6% market share.

“We are very diversified both geographically and in terms of the types of bonds we handle,” said Roger Davis, Orrick’s head of public finance. “We’re also particularly strong on both coasts, which is where a disproportionate amount of the activity occurs.”

The majority of Orrick’s deals were negotiated bonds, where it also placed first with an 11.6% market share.

Second-ranked bond counsel Hawkins, Delafield & Wood LLP took 4.8% of all deals in the nine months ending September. The public finance-only firm participated in 227 deals totaling $14.1 billion, including 71 issues worth $3.1 billion in the third quarter.

Chapman and Cutler LLP worked on the largest number of deals, opining on 406 borrowings totaling $5.7 billion, which ranked it 11th by volume.

Among underwriter’s counsel, Hawkins re-established its top ranking after coming in fourth mid-way through the year.

The firm served on 96 borrowings worth $12.2 billion, reflecting a 5.6% market share for the year — including a 7.1% share in the third quarter. Global law firm Nixon Peabody LLP ranked second among underwriter’s counsel, a spot up from its ranking in the same nine months a year before. It worked on 42 issues ­totaling $10.9 billion.

Sidley Austin LLP fell to third place, owing to a weak showing last quarter in which it ranked 20th by opining on just six issues worth $851 million. In the nine-month period it participated on 29 issues totaling $9.3 billion.

Within credit enhancements, Assured Guaranty Ltd. remains the only bond guarantor still insuring debt in the primary market. Through its two platforms, Assured wrapped 1,293 issues totaling $20.8 billion, reflecting a 7% slice of the $296.7 billion issued through September.

“We are pleased with the business we have added this year,” said Sean W. McCarthy, Assured’s chief operating officer. “Year-to-date, we have served approximately 1,400 issuers, both large and small, across a wide spectrum of the municipal market, insuring more than 20% of all single-A issues.”

Assured Guaranty Municipal Corp., the company’s muni-only insurer, wrapped 81.2% of that volume. Assured Guaranty Corp., its more diversified platform, backed the rest.

Assured wrapped $8.6 billion of new bonds in the third quarter, up from $7 billion in the second quarter. Compared to the first three quarters of 2009, however, bond insurance volume is down by 31%.

“In the current economic environment, we provide much needed surveillance and liquidity, in addition to our guaranty,” McCarthy said. “We have also experienced increased demand for our financial guaranty products in the retail market.”

Meanwhile, public guarantors have seen more business.

In the first nine months of 2010, 998 issues worth $14.2 billion came to market enhanced by local and state government guarantees, versus 558 deals totaling $5.8 billion in the same period one year ago.

Two of the largest programs accounted for almost half of all volume: the Permanent School Fund of Texas wrapped 248 issues totaling $4.1 billion of debt, while Pennsylvania’s Higher Education Agency guaranteed two borrowings worth $1.6 billion.

The top rankings for bond trustees, when ranked by principal amount, were pretty well unchanged from last year. Bank of New York Mellon continued in the top place with $62.9 billion of debt on 756 issues for a market share of 40.7%. U.S. Bank NA and Wells Fargo continue to rank second and third, respectively, working on deals worth $44.1 billion and $19.8 billion.


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