During the depths of the financial crisis, many European companies found they could no longer rely on banks for lines of credit. With balance sheets under stress, banks were unwilling or unable to lend to companies. Many businesses decided, therefore, to bypass the banks and go to the capital markets. In 2009, €305m was raised in the European corporate bond market, twice the amount in either of the previous two years, according to data provider Dealogic. Even though the crisis is over, banks have spent the past few years building up their own capital, leading to this reduction in lending becoming entrenched. Bank lending in the eurozone returned to growth only in March 2015 after three years of decline, according to the European Central Bank. But for lawyers, this shift represents an opportunity. Innovation in the structure of securities allows lawyers’ corporate clients to tap new sources of funding for credit-constrained businesses. At the same time, new forms of lending, often online, create legal challenges to be solved. Businesses now have many funding options beyond bank debt and maybe a little equity, says Lucy Tarleton, director of capital markets at consultancy PwC. Virgin Atlantic , the airline, prompted one innovation. In the US, using take-off and landing slots as debt collateral has long been a staple of airlines’ bond sales but had never been successfully employed in Europe. International Airlines Group, the parent company of British Airways, attempted to launch such a bond in 2012 but withdrew it because of its complexity. In 2015, Virgin aimed to become the first European airline to borrow against its slots at London’s Heathrow airport. Borrowing in this way is tricky, says Herbert Smith Freehills, which acted for Virgin. An airline does not own and can lose its take-off and landing slots if […]
