Rivals get dewy-eyed as Ashurst talks about why it still loves structured finance

Structured finance has entered weird territory. On one level the market is nowhere and yet it is everywhere. Nowhere, in that the primary market that was driving law firms until the summer of 2007 has all but dried up; yet everywhere, in that clearing up the mess caused by the credit crunch means it's hard to find an area of business in which structured finance skills aren't being called upon.

Unwind work for structured investment vehicles (SIVs) and bank failures, advising on products that have suffered credit down-grades and dealing with counter-party risk is now what keeps advisers busy – meaning the practice area in Europe hasn't yet suffered the total wipe-out some were expecting. And, as Clifford Chance's Kevin Ingram points out, accessing government-backed liquidity schemes, which typically require structuring and packaging for the assets which can be used as collateral, is "basically structured finance". Adds Ingram: "You can't find a good derivatives lawyer in the City for love nor money."

Perhaps this uncharted territory explains the oddly positive reaction to Ashurst's surprise US law launch with a 10-partner team driven by structured finance from its ally McKee Nelson. The reaction could be summed as two parts surprise, one part admiration for the firm's pluck.

Ashurst's Erica Handling (pictured right), one of the architects of the deal, concedes the pitch was at first a tough one. "Everyone said, 'what are you talking about?' when we first floated this. There was a lot of scepticism initially but people understood it once we made the case."

Still, for some, the deal will look like commercial suicide at a time when many firms are rapidly down-sizing structured finance exposure. Instead, Ashurst will increase its practice by nearly a third, forging a 29-partner global team. In New York alone Ashurst will have six counsel, 11 associates and two paralegals alongside the seven partners transferring.

But what the move demonstrates is long-term commitment to a market even the most gloomy finance lawyers believe will re-emerge in some form. Handling comments: "The techniques are not going away. The products and their names will change, as will the way they are regulated, but the model is not going away."

There were other obvious attractions. Having already worked with the well-regarded McKee team for five years in a referral alliance, Ashurst had the rare chance to know what they were buying. Indeed, the connection goes back further, with Handling having worked with Bill Gray, the leader of the McKee team, when they both worked at Weil Gotshal & Manges.

Ashurst also sees the team as a reflection of its own City practice in style and focus. Ashurst's 15-partner team has a non-segregated approach and a practice focused on collateralised debt obligations (CDOs) and a broad spread of derivatives. Like the new team, Ashurst is not focused on classic securitisation and general asset-backed securities (ABS) work. The client mix is likewise obvious with the US team acting for JP Morgan, Merrill Lynch/Bank of America, Deutsche Bank and Goldman Sachs. All of which are major institutional clients for Ashurst (alongside Credit Suisse, BNP Paribas, RBS and Nomura).

Probably the biggest question is whether Ashurst has set out its stall in the right place. Some finance lawyers believe the green shoots of recovery will come in classic structures like high quality residential mortgage deals and credit card securitisations. On this analysis, more opaque products like CDOs and the more complex SIVs aren't coming back for a long time, if at all.

Yet commitment, clarity of purpose and a proactive message goes a fair way. As one rival comments: "This could be very good for Ashurst. McKee has a reasonable profile in the US and it is also a positive statement that I imagine Ashurst will find invigorating."

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