In this market, even a down quarter can lead to first place.
As is the case, the dramatic drop in issuance so far in 2011 for the municipal bond market played a major role in upsetting the rankings for bond, disclosure, and underwriters’ counsels in the first quarter. Compared with the same period last year, the slight issuance left the top-10 lists for all three groups in disarray.
One big score in negotiated issues netted Kutak Rock LLP the top spot among bond counsels. The Omaha-based firm captured a 9.4% market share for the quarter, narrowly edging out longtime leader Orrick Herrington & Sutcliffe LLP. Kutak opined on 31 issues, valued at more than $4.3 billion over the period, according to Thomson Reuters.
Although it did slightly less business notionally and completed 46% fewer issues than it did in the first quarter of 2010, the numbers were enough for Kutak to leapfrog Orrick and two other firms to grab the pole position. It also took the largest deal this year to date — $3.7 billion of taxable general obligation bonds for Illinois pensions — and a complete absence of issuance in California to achieve that honor.
“We were positively affected because the state of Illinois did a very large financing, and we happened to be bond counsel for that,” said John Wagner, a senior partner at Kutak.
Looking forward, Kutak expects a down year for issuance, according to Wagner, who added that numbers for the three remaining quarters may not improve noticeably.
“We see the rest of the year being slow,” he said, “and most other people see it being slow as well.”
For its part, runner-up Orrick participated in 69 issues, representing almost $3.8 billion in the first quarter — an 8.3% market share. Over the same period last year, the numbers were 103 issues, representing about $16.2 billion, at a 15.6% market share. There were many factors for the decline, ranging from headline risk to insignificant refund activity to the expiration of the Build America Bond program, according to Roger Davis, Orrick’s head of public finance.
But California, the firm’s largest client, played a major role. In the first quarter, the state issued no tax-exempt bonds. It issued $5.9 billion over three issues during the same period in 2010.
Orrick anticipates more activity over the rest of the year, Davis said, and even though it will likely fall well short of 2010, it won’t in any way be a disaster for the firm.
“In public finance, historically, after 10 straight good-to-great years, it’s hard to complain too much about one slow one — as long as it’s only one,” he said.
Rankings for disclosure counsel were even more topsy-turvy in the first quarter. The leader, Chicago-based Chapman and Cutler LLP, made a large move to the top. It had ranked 15th for the first quarter of 2010, and 17th for the year.
Chapman provided disclosure services for 33 issues that represented $3.98 billion in the first quarter, taking 31% of market share. It was a whopping 1,012% jump in business over the same period in 2010. And it was almost three times the amount of business the firm did all of last year, when it was disclosure counsel on 119 issues totaling $1.35 billion.
As with Kutak, Chapman and Cutler was part of the state of Illinois’ enormous $3.7 billion pension bond issue. But the firm is also bracing for more business, according to Kelly Kost, its practice group leader for the Illinois Public Finance Department.
“As a firm and as a department, we’ve recognized the evolving world of disclosure and have committed more resources — both partners and associates — to this part of our practice,” Kost said. “Also, for the number of deals, over the last couple of years, we’ve seen a large increase in a lot of different issuers, underwriters and financial advisers wanting assistance as disclosure counsel. So, we’ve done a number of those deals.”
Despite the industry’s current struggles, Chapman and Cutler expects business will pick up by the third quarter.
Chapman took the crown from Orrick, which saw its disclosure counsel business plummet to 25 issues, representing $1.13 billion, from 33 issues, representing $4.8 billion.
One firm made huge strides in the rankings for disclosure counsel this past quarter. Nabors, Giblin & Nickerson PA, in Tampa, saw a huge uptick in its disclosure business and placed fifth. For the same period in 2010, Nabors placed 40th. The firm was disclosure counsel on five issues totaling $601 million. That’s more than 10 times the business it did over the same period last year, when it was counsel on one issue for $57.2 million.
For underwriter’s counsel, Peck, Shaffer & Williams LLP took the lead. The Cincinnati-based firm worked on nine deals, worth $4.06 billion — a 13% market share. It leapt from 19th place during the same period in 2010, when it provided counsel on less than 30% of that amount. In fact, Peck totaled 81 deals worth $4.35 billion in all of 2010.
