Hong Kong lawyers play ‘musical chairs’
The past year has seen a significant shake-up in the aviation finance law market in Hong Kong.
At least four firms – Berwin Leighton Paisner (BLP), Holman Fenwick Willan, King & Wood Mallesons and Pillsbury – have either expanded their teams here or set up a practice.
But sources say that the moves are not so much new players coming into the market as old hands moving around and established firms with expertise in other practice areas looking to cash in on the boom in aviation finance in Asia.
One Hong Kong-based lawyer describes the process as one of “musical chairs”.
“I’m not sure there are new entrants; they are just wearing new hats. It seems to be more a case of people moving around than someone totally new on the block,” said the source.
“The players have all been here for donkey’s years. The barriers to entry are quite high. The only way I think a firm could expand into this in Asia is to take someone from a firm that’s already here.”
BLP rebuilds a team
BLP lost two of its Asia-based partners earlier this year. Both Hong Kong-based partner Justin Sun and Singapore-based partner David Brotherton left the firm in early 2016 to join Holman Fenwick. In Hong Kong, BLP was quickly able to replenish its team with the integration of local boutique aviation law firm William KK Ho & Co. BLP claims the merger was unrelated to the departures and had been under discussions for 18 months.
“With hindsight, it looks like just a convenient way of rebuilding a team. We’d been affected by Holman Fenwick’s desire to get into this market, although the team in Singapore was much more affected in terms of numbers by that move than Hong Kong,” says Nigel Ward, a partner in BLP’s Hong Kong office.
In Singapore, newly appointed partner Simon Spells has been busy replenishing and strengthening the team, since Brotherton took his associates to Holman Fenwick.
Spells tells Airfinance Journal that process is complete, and the Asia team has doubled in size from 12 fee earners to 24. Spells adds that he also has an of counsel joining from Clifford Chance, as well as two new associates from Norton Rose and Dentons. William Ho, the managing partner of William KK Ho & Co who set up the firm in 2008, says the merger was a result of his foreseeing that he needed either to expand his firm rapidly via organic growth, or join forces with another practice.
“I did try a bit to expand the firm, but, of course, it’s easier said than done,” he says.
“Last year, I was aware that BLP was doing well as far as aviation finance is concerned. I saw a lot of synergies in working together and the vision is to build the best – the pre-eminent – asset finance team in Asia and globally.”
Ho’s firm enjoyed a good degree of success in Hong Kong and his brand was well-known among clients, particularly in mainland China. He recently scooped an award from Airfinance Journalfor his work for China Southern on the delivery of the first export credit agency (ECA)-backed renminbi-denominated aircraft deal.
But, as one partner in Hong Kong says, the time may not be so good for boutique firms to go it alone.
“It’s always very dangerous as a lawyer to be in one business area,” the partner tells Airfinance Journal.
“If all you do is M&A or debt capital markets, it really is all your eggs in one basket.I’m sure one of the reasons William did this was to diversify the areas he is in. It’s not so much a bad time to set up a boutique firm, but if all you do is aircraft finance, that’s quite a narrow business to be in because you need regulation, litigation and derivatives expertise, etc.”
“If all you do is M&A or debt capital markets
Holman Fenwick: here comes the Sun
Holman Fenwick’s expansion in Asia has been led by Leigh Borrello, a partner who moves between the firm’s Sydney and Singapore offices. When he came on board in 2014 having spent nearly two decades as a partner at Norton Rose Fulbright, Borrello was given the mandate
of expanding the aviation leasing and financing side of the business.
“The intention over the next couple of years is to have a team of people which, at least size-wise, is comparable to our competitors and hopefully at least on the expertise side is as good or better,” he says.
Justin Sun, who started work at Holman Fenwick’s Hong Kong office in late June, has a team of three associates. Sun is well regarded in the market for his contacts with Chinese clients, and these will certainly be of use to him at Holman.
He explains that, although the team has been boosted in both Hong Kong and Singapore with his and Brotherton’s appointment, the strategy for the firm continues to be that everybody works together across offices.
He says: “That’s part of our strategy and also kind of dictated by the asset we’ve been working for. Aircraft are a moveable asset and we do transactions from everywhere.”
King & Wood Mallesons: opportunities in China
King & Wood Mallesons has set up an aviation and asset finance team in Hong Kong headed by Tejaswi Nimmagadda. His team of five includes senior lawyer Kelvin Zha, who started his aviation career as an in-house lawyer at China Southern Airlines.
Nimmagadda says the practice’s strategy is to focus on international clients and give them the localised experience in China. This is tied into the firm’s recent history, when in 2012 Chinese firm King & Wood PRC Lawyers merged with Australian firm Mallesons Stephen Jaques.
As a result of the merger, King & Wood Mallesons has 11 offices in China and more than 1,000 lawyers in the country. King & Wood’s proposition is that it is a global firm with its headquarters in Asia, which it says is “quite unique” because most international firms have headquarters in London or the US.
“It means that the client experience is a one-stop shop, particularly with entry into China because of the PRC local law capability we can offer, under the same instructions rather than appointing domestic counsel,” says Dina Moss, head of business development.
“Clients don’t think of the different jurisdictional issues; they just want to deal with the one team,” says Nimmagadda.
“We can also bring the international experience to the PRC players who are looking to internationalize their business.”
He adds that in the past, international aviation finance players mainly targeted only state-owned lessors and airlines.
“Now, because of the depth of the market but also trying to get their return hurdles they’ve decided to focus on second- and third-tier lessors and airlines. From our perspective, that requires more of a rigorous legal analysis because of the risks involved,” says he says.
“You really need to put some more rigour into your analysis as to what happens after default, and look at local enforcement analysis if the worst were to happen. How do we repossess and take these people to court. On the airline front, what are going to be competing creditors? Those sorts of issues.”
Pillsbury goes to Hollywood
Pillsbury has opened its new Hong Kong office in the Kinwick Centre on Hollywood Road in the city’s Central district. Paul Jebely’s team consists of associates Luca Denora, Sharon Nourani and Zara Machado – all of whom previously worked with him at Clyde & Co Hong Kong. Airfinance Journal reported in February that Jebely had tendered his resignation from Clyde & Co.
The following month, Pillsbury announced he would be establishing its new office in Hong Kong. Jebely declined to name the other law firms he spoke to, saying in an interview with Airfinance Journal that it was “more than one and less than five” in what was a “very focused-fire exercise”.
He says: “I don’t have a crystal ball and I don’t know what the future of law looks like, but certainly at this time there is strength in numbers and the strength of the platform on which a practice operates makes a big difference. So it’s very difficult for small firms, no matter how strong they are in this specific practice area, to operate.
“I fundamentally believe that the timing is not right for boutique firms to practice in the commercial aviation finance sector servicing institutional clients.”
Pillsbury already has offices in Beijing and Shanghai, and Jebely says he is more likely to focus on other areas of the world from the Hong Kong office.
Jebely began his career working with African financial institutions doing business jets, and he continues to tap that continent’s market – even from Hong Kong, which is more than 11,000 kilometres and a 13-hour flight away.
“A lot of people will look at it and wonder, ‘How does that work from a time-zone perspective and geographic coverage?’ First of all, the geopolitical relationship between Asia and Africa is now greater than that between Asia and Europe or even Asia and the US,” he says.
Although aviation finance was the impetus for launching the Hong Kong office and, for now, remains the primary focus, Jebely will eventually branch out and service other areas as well.
He says: “Certainly, our aviation finance practice will grow, but if it’s a scenario where it’s five years from now and aviation finance is still the dominant practice, I probably haven’t done my job to the fullest extent.”