A lot changed for the municipal legal industry in 2010.
Legal rankings for bond, disclosure, and underwriters’ counsel were remarkably similar to 2009 despite unprecedented issuance, headline risk and regulatory steps.
Orrick, Herrington & Sutcliffe LLP retained the top spot among bond counsel with a 10.4% market share. The firm opined on 416 issues worth $44.69 billion — more than twice the volume of the No. 2 finisher, according to Thomson Reuters.
However, Roger Davis, Orrick’s head of public finance, said the 2011 environment looks less appealing. The market now lacks the support of Build America Bonds, borrowing rates are higher, refunding issues are likely to dwindle, and budgets will be severely constrained.
“If I could check the box and repeat 2010 in 2011, I would,” Davis said. “Working with the reality that we face, I don’t see 2011 looking like any kind of disaster, but [we] are going to have to be consciously managing our resources.”
Orrick’s bond counsel volume fell more than $10 billion compared to 2009, as California, its largest client, issued $12.6 billion fewer bonds.
Hawkins, Delafield & Wood LLP repeated in second place by working as bond counsel on 339 issues totaling $21.8 billion for a 5.1% share of the market. Sidley Austin LLP maintained the No. 3 spot by completing 83 issues worth $15.59 billion.
Kutak Rock LLP was one of the few exceptions to the status quo as it jumped three spots in the year to place fourth. The firm worked on 375 issues totaling $15.16 billion, or almost double its 2009 volume. The Omaha, Neb.-based firm also placed fifth among underwriters counsel and third among disclosure counsel to finish in the top five for all three categories for the first time.
“We are doing more work with large governmental issuers such as Maryland and Long Beach,” said John Wagner, co-head of public finance. “Several practice areas in which we are industry leaders — student loans and airports — were [also] quite active.
Chapman & Cutler LLP was the most active bond counsel of 2010 in number of issues, completing 603 separate deals. It slipped to 10th from the No. 8 slot in volume.
Among underwriters’ counsel, Nixon Peabody LLP regained its No. 1 spot from Hawkins, which interrupted what would have been a five-year streak. Nixon worked on 86 deals worth $19.58 billion to capture 6% of the market.
Hawkins completed 143 deals for $19.15 billion.
“Our reputation should stand us in good stead as people get more concerned about specific regulatory reforms and disclosure,” said Art McMahon, Nixon’s practice group leader for public finance.
The 2010 rankings suggest Nixon Peabody is a go-to firm when things get complicated, he said.
Greenberg Traurig LLP made one of the biggest moves of 2010 as it moved rapidly through the underwriters’ counsel pack.
The international firm more than doubled its volume, jumping 15 spots to finish 10th overall.
Holland & Knight LLP also was a fast mover among underwriters’ counsel. The Florida-headquartered law firm climbed into 20th by opining on $3.9 billion of issues, after finishing 152nd in 2009 with $300 million.
Rick Stephens, a partner at H&K, said the firm has been involved in public finance for 35 years and its rankings fluctuate with clients’ capital market needs.
Last year’s jump in rankings result largely from its work on two large issues for the Empire State — a $1.3 billion sale in October for the Dormitory Authority of the State of New York, and a $1.1 billion BAB deal in December for the Empire State Development Corp.
Orrick was easily the top-ranked firm for disclosure counsel, running away from the field with a 22.3% market share on 132 deals worth $24.48 billion. Orrick worked on more deals, by volume, than the next four firms combined.
Fulbright & Jaworski LLP placed second among disclosure counsel, moving up four spots in the year as its volume jumped 146%.
A $1.5 billion deal in July for the Texas Transportation Commission was one factor in the rankings boost; another was the $1.1 billion issue it completed for the Texas Public Finance Authority.
Among credit enhancements, the only bond insurer still writing insurance was Assured Guaranty Ltd. Its two platforms wrapped 1,698 bond issues worth $26.77 billion.
Assured Guaranty Municipal Corp. wrapped 83% of that total, while Assured Guaranty Corp. insured the remaining 17%. Assured gives underwriters the option of which platform to use.
The only real difference is that AGC maintains exposure to structured-finance debt.
Assured had record earnings through the first three quarters but has struggled to expand its public finance business after the demise of its competitors during the credit crisis.
Assured captured 6.2% of the $431.89 billion issued last year, versus 8.6% in 2009.
Recent statements from executives indicate the company believes the expiration of the BAB program could help Assured by increasing the supply of tax-exempts that will enter the market.
But Assured also lost its sole triple-A rating in October, so it’s unclear how demand will shape up.
With fewer private insurance options, issuers are increasingly using state-sponsored programs to guarantee their debt. These “other guarantees” wrapped $24 billion of debt in 2010 — more than three times the volume one year before.
The Texas Permanent School Fund is by far the biggest state-sponsored program. It wrapped $6.96 billion of school debt last year, good for a 29% share of the state-sponsored market.
“We’re really proud of the program,” said Debbie Radcliffe, communications director at theTexas Education Agency. “It’s been extremely successful for the state. It’s saved our taxpayers millions of dollars and nobody has ever defaulted, so our track record is good.”
Rankings for bond trustees were relatively unchanged. Bank of New York Mellon took the top place with $94.6 billion of debt on 1,119 issues for a market share of 40%, when trustees are ranked by principal amount.
U.S. Bank NA and Wells Fargo continue to rank second and third, respectively, working on deals worth $65.9 billion and $32.5 billion.