Greg Campbell is a partner in the Corporate Finance and Restructuring practices of O’Melveny’s London office, having previously been a partner at Gibson, Dunn & Crutcher, and an associate at Cleary Gottlieb. He is a highly experienced leveraged-finance, special situations and restructuring lawyer, with a focus on high impact cross-border matters. He has over 25 years’ experience advising borrowers, sponsors, lenders, creditors, and investors, and has been recognised as a leading practitioner by Chambers UK. He also advises on financial services compliance and regulatory issues including anti-money laundering and sanctions-related matters.

Why do trainees enjoy banking/finance seats?

A seat in a “Banking” or “Finance” team would likely offer an insight into the ways in which companies obtain capital from a variety of external sources. The vast majority of companies will at some point require some form of external funding (remember, even a company credit card is a form of bank loan), so gaining an understanding of the processes involved in lending/borrowing and how banks and lenders operate from a legal perspective can be very useful, even if your primary interests lie elsewhere. 

In addition, a standard banking/finance transaction typically requires the drafting and negotiation of a broad range of documents, many of which are fairly short and are often prepared by trainees. You may therefore be given greater opportunities to get involved in substantive legal drafting at an earlier stage in a Banking/Finance seat than would be the case in some other seats. 

What do finance lawyers do?

Firms structure their banking/finance practices in a wide variety of ways and use different terminology to define each team within that practice. You may come across teams with names such as General Corporate Lending, Leveraged Finance, Capital Markets, Corporate Finance, Project Finance and so on. To broadly summarise the different types of finance work carried out by large commercial law firms:

• General corporate lending: where companies borrow money from lenders, for example to fund their day-to-day operational activities.
• Acquisition finance: where companies or investors (e.g. private equity firms) borrow money for the specific purpose of financing an acquisition of another company. This type of work might also be carried out by a “leveraged finance” team, alongside other types of lending. 
• Asset finance: where a borrower borrows money for the purpose of acquiring specific assets, such as equipment, machinery and vehicles. Usually the assets purchased will be used as security for the loan.

Security: this is an essential form of protection for lenders. “Security” refers to a right given by a borrower to a lender that typically entitles the lender to take control of some (or all) of the borrower’s assets if the borrower fails to repay the loan as agreed. Under such circumstances, the lender can then try to sell enough of those assets to repay itself. There are many types of security, including mortgages, fixed and floating charges and guarantees, some of which are considered in more detail later in the "Practical Commercial Awareness" course.

Guarantee: involves a guarantor (e.g. a parent company) making a legal promise to a lender that they will fulfil any outstanding financial obligations covered under the guarantee if the borrower (e.g. a subsidiary of the parent company) defaults on a loan.

Subsidiaries: subsidiaries are companies that are owned/controlled (or partially owned/controlled) by another company (known as the “parent” or “holding” company).

• Project finance / infrastructure finance: where borrowers (e.g. companies or governments) secure long-term funding for a large long-term project (e.g. building a wind farm) or infrastructure development (e.g. building an airport or high speed rail network). The funding for these types of projects is usually structured so that the borrowed funds are released in tranches, the release of each being contingent on the borrower hitting certain milestones.
• Real estate finance: where borrowers borrow money for the purpose of acquiring property (e.g. a factory).
• Capital markets: where companies raise money through the capital markets, for instance through raising debt (e.g. by issuing bonds) through the debt capital markets, or selling equity (i.e. shares) through the equity capital markets.
• Restructuring and insolvency: where the team assists businesses that are experiencing financial difficulties or have been declared bankrupt, for instance by organising the restructuring of its financial arrangements, or helping to administer its assets during a bankruptcy process. Some firms might have a dedicated practice area for insolvency work, whereas others might include the insolvency team within its broader finance practice.

Insolvency: a company is “insolvent” when it cannot pay its debts when they become due, or when the total of its liabilities exceeds its assets. If a company becomes insolvent, it must cease trading.

Liabilities:  legal responsibility for a particular problem, or in finance terms, outstanding debt.

Note that when a borrower borrows money, it may do so either on a bilateral basis (i.e. where one lender provides the loan) or via a syndicated loan (i.e. where a collection – or “syndicate” - of lenders together provide the loan).

Syndicated loan: when borrowers need to raise large amounts of money, lenders may “syndicate” (i.e. group together) and collectively provide the required capital (hence the term “syndicated loan”). Doing so enables lenders to spread the risk and collectively lend amounts that each individual lender may be prohibited from lending by their internal credit committees. Each lender will then receive a share of the interest payments.

In the context of a deal, Finance teams may advise on the proposed financing of the deal and draft the key finance documents. They may also carry out finance-related due diligence to: clarify the terms of the parties’ prior/existing financing arrangements and assess how these terms could affect any new financing; ascertain whether security exists over the target’s assets (if so, this will likely need to be released before the target changes hands); determine whether security can be taken over the borrower’s assets and/or the target’s assets (post-completion) to support a loan; and ensure any financial transactions comply with relevant regulations.

Note that we cover the role of finance lawyers in the context of a transaction in our A law firm's role on a transaction case study. In this course, we also explain the differences between private equity and venture capital.

In addition, our M&A course includes explanations of some of the issues and processes that transactional lawyers often need to advise on.