Sidley Joins Forces with Bond Trustee Wilmington Trust in Landmark Greek Debt Restructuring

It began with an urgent phone call in February 2012. Longstanding client Wilmington Trust, with whom the firm has worked on a variety of matters, including various restructurings in both the U.S. and Europe, contacted David Howe, a partner in Sidley’s London office and member of the firm’s Capital Markets group. Wilmington was inquiring about our availability to provide pressing advice in connection with their bid to act as bond trustee in a major European restructuring.

Initial instructions were brief but intriguing: it would be a high-profile, politically charged transaction to be executed on a short timetable, requiring a small, dedicated team with significant partner involvement. The suggestion was that the deal at hand “could be quite interesting.”

Largest-ever sovereign debt restructuring

The resulting transaction turned out to be Greece's sovereign debt restructuring, the so-called Greek “Public Sector Involvement” (PSI). Our involvement provided an opportunity to deliver legal talent on multiple fronts for an important client with whom Sidley shares a longstanding relationship. The transaction was the first developed country bankruptcy since the 1930s and the largest sovereign debt restructuring ever completed. It involved the restructuring of more than €200 billion of Greece’s privately held bonds, including the exchange of existing Greek bonds for approximately €62 billion of new, English law governed bonds and €62 billion of GDP-linked “recovery” securities. Wilmington Trust, represented by Sidley, acted as the bond trustee, representing the interests of the holders of the new English law Greek bonds issued as a result of the restructuring.

Teamwork on multiple fronts

“It was fantastic to be involved in such an interesting and seminal transaction” said Howe, who regularly advises London-based bond and security trustees in connection with various new issues and restructurings. “The somewhat novel use of an English law trustee structure for a sovereign debt issue, the first adoption of the new EU-mandated collective action mechanics and the complex inter-creditor arrangements with the EU public sector/IMF creditors threw up multiple and challenging issues. Those required the input of advisers familiar with not only trustee-related matters but also the mechanics of debt capital markets-related liability management and restructuring transactions generally: that is very much a strength of our English law capital markets team here in London.”

Howe, together with other members of Sidley’s capital markets team who advise trustees, frequently fill an important value-added role for debtor and creditor clients alongside the firm’s restructuring team.

The deal made waves among colleagues in the industry, with Sidley being recognized by The American Lawyer for its role in the transaction. The publication named it the “2013 Global Finance Deal of the Year: Public Restructuring.” The firm’s work was also recognized in April by IFLR, which named the same transaction “Debt and Equity-Linked Deal of the Year 2013.”