Friday, 14 September 2018

Deal watch: City high-flyers land jumbo £4.4bn BA pension deal as Blackstone’s buying spree continues

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Deal watch: City high-flyers land jumbo £4.4bn BA pension deal as Blackstone’s buying spree continues

City heavyweights Allen & Overy (A&O), Clifford Chance (CC) and Eversheds Sutherland have landed key roles on Legal & General’s £4.4bn buy-in of the British Airways pension scheme as advisers cash in on a brace of Blackstone deals.

UK insurer Legal & General is taking on £4.4bn of historic pension liabilities relating to the Airways Pension Scheme (APS) in a bulk annuity designed to reduce risk in the scheme.

A&O and Eversheds are advising the trustees, with A&O’s team led by insurance partner Philip Jarvis and counsel Kate McInerney. For their part, Anthea Whitton and Francois Barker are heading the Eversheds team.

The CC team advising Legal & General is being led by corporate partner Katherine Coates and pensions partner Sarah McAleer.

The deal also covers existing longevity reinsurance contracts of roughly £1.7bn entered into by APS via a captive insurer with Canada Life Reinsurance and PartnerRe, which were incorporated into the buy-in arrangement. Closing of the deal will mean that APS is now 90% hedged against all longevity risk.

‘This deal is very significant in the market and part of a trend of which there are push and pull factors,’ one City partner told Legal Business. ‘On the push side, there are trustees out there looking to de-risk and on the pull, market conditions are making deals like this economically viable transactions.’

APS was established in 1948 and it was closed to new members from 31 March 1984. The scheme had 24,196 members, of whom 1.4% were active members, 3.6% deferred members and 95% pensioners. At the end of March 2018, APS had assets totalling £7.6bn.

Elsewhere, the blistering private equity market saw A&O win the mandate to advise private equity giant Blackstone on its €1bn acquisition of a majority stake in Baltic bank Luminor. The deal involves funds managed by Blackstone and other institutional investors acquiring a 60% stake in the bank, with Nordic banks Nordea and DNB each retaining a 20% stake.

A&O’s private equity partner Karan Dinamani led on the deal – the Magic Circle firm’s inaugural deal for Blackstone on the buyout side – which builds on a long-standing relationship acting for Blackstone’s lenders on real estate transactions.

Commenting on the frothy PE market, Dinamani told Legal Business: ‘A lot of private equity players are looking to acquire right now and the London market is roaring. The fact that a private equity player is acquiring a majority in an European Central Bank regulated bank makes the deal interesting and complex.’

With €15bn of assets, Luminor was created in 2017 through a combination of Nordea and DNB’s operations in the Baltics.

Meanwhile, a £1.5bn deal that saw Blackstone Property Partners and Telereal Trillium acquire Network Rail’s commercial business estate sealed roles for Kirkland & Ellis, CC, Eversheds and Gowling WLG.

CC and Eversheds acted as legal advisors to Network Rail, with CC’s team comprising partners Franc Peña, Angela Kearns and Adrian Levy and Nick Bartlett leading for Eversheds.

Kirkland and Gowling advised buyers Telereal and Blackstone, with the Kirkland team led by corporate partner Michael Steele and including corporate partner Carlos Gil Rivas. Mike Twinning led the Gowling team.

The portfolio includes 5,200 properties, the majority of which are converted railway arches.

The sites are being sold on a leasehold basis, with Network Rail retaining access rights for the future operation of the railway. The proceeds are being put towards the UK railway upgrade plan.

nathalie.tidman@legalease.co.uk