Year: 2020

Winner: Cleary Gottlieb Steen & Hamilton

Tucked inside the dominant transactions across Latin America’s markets, in a year unlike most any on record, Cleary Gottlieb Steen & Hamilton distinguished itself by a solid margin to win LatinFinance’s 2020 Law Firm of the Year award.

This marks a return for Cleary to the top spot, having proven itself with involvement in six category winners ranging from sovereigns to corporates to sustainable finance.

COVID-19, collective action clauses (CACs) and the collapse in oil prices proved to have been accelerants in coming to agreements in the case of Argentina’s award winning $66 billion restructuring and Ecuador’s speedy sovereign liability management that allowed it to avoid a legal default.

“It was as early as Easter that we were already locked into a room with the minister and his team trying to figure out how they were going to manage the process,“ Andrés de la Cruz, a partner at Cleary Gottlieb told LatinFinance about the firm’s involvement with trying to get Argentina’s foreign financial obligations under control.

“These provisions (CACs) were first introduced in 2014 in their current drafting, but have never been used. And Ecuador and Argentina tested them for the first time this year,” de la Cruz said, adding: “Both restructurings got done in what I would say was record time.”

Ecuador restructured 100% of its debt while Argentina got 99.1% of its bonds restructured. “So this is incredible for the world of sovereign debt.

This is particularly poignant for Argentina, as the last time it fully cured a sovereign default was after 14 years of distorted economic policies, countless court hearings and billions of dollars in payouts to holdout investors.

In Ecuador’s case, the engagement with the International Monetary Fund, private creditors and China, all at the same time was significant, says de la Cruz.

“I think it was quite masterful in the way they were able to conduct the process. Ecuador is going through a very challenging economic period,” he said.

“The drop in oil prices really put them upside down at the beginning of the year, which also gave them probably the ability to stand in front of their creditors and say, guys, it is not us, it is the oil price. I think what Ecuador teaches us is not only the deployment of CACs but also how they were able to sort out a process with various stakeholders, everybody engaged. Nobody is kept out.”

Engagement with China will be a major topic of discussion in the coming year for creditors and their sovereign borrowers.

“China is a very significant lender, not only in Latin America but throughout the world. Everybody is gearing up to see how China is going to behave if the situation continues with sovereign restructurings proceed as many expect next year,” de la Cruz said.

In addition to Argentina and Ecuador, Cleary played significant roles in Mexico’s $6 billion worth of sovereign debt offerings, as well as PEMEX and Cemex’s bond transactions.

The firm was also involved in perhaps one of the most significant transactions across all categories this past year: a $750 million sustainability-linked bond from Suzano, the first in Latin America.

The use of key performance indicators (KPI) embedded in the bond’s covenants helped paper and pulp producer Suzano to lower the yield it has to pay investors if it meets its obligations.

To Cleary partner Nicolas Grabar, this use of KPI’s is significant not only for achieving lower yields or tapping large pools of investor money searching for “green” finance homes.

“More of our clients attach a lot of importance to their reputation and this kind of financing supports their commitment to sustainability more generally,” Grabar said. – LF