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Special Report 2021 Project Finance & Infrastructure Journal Brexit special report 2021 Sponsored by:
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Brexit Special Report 2020
Sponsored by:
Assured Guaranty –
a Parisian response to Brexit
IJGlobal speaks to Assured Guaranty’s Paris-based Raphael de Tapol about the challenges
brought by Brexit and how AG has risen to overcome them…
As the only company still actively engaged was a very good dialogue with the regulator Raphael de Tapol
in writing new financial guarantee business and it was a relatively smooth process.
in Europe, Assured Guaranty (AG) is well “AGE obtained its licence at the start of
positioned for the post-Brexit environment 2020 and wrote its first policy the following
having created a new subsidiary, AA rated month – the financing of one of the Spanish
Assured Guaranty (Europe) SA (AGE) to solar PV projects that we have guaranteed.”
serve the European markets from Paris. Its
previous UK business, Assured Guaranty UK Transfer of assets
Limited (AGUK), continues to operate from One of the first tasks the Paris office faced
London. was the transfer of existing EU exposures
AGUK has historically covered everything from the UK to the new French balance
from the UK to the rest of Europe, sheet.
Australia and New Zealand. However, “AGUK, our London based company,
while Brexit served as a catalyst, AG was had issued a number of policies for the
already considering opening a continental financing of various European infrastructure
European base of operations as the team projects and it was essential that we ensure
were seeing increasing opportunities in those policies remain enforceable for our
Europe. policy holders and that we would be able to
Raphael de Tapol, Deputy Managing continue to service them after Brexit,” says
Director at AGE, says: “Regardless of Brexit, Raphael. “To that end, we had to transfer
we saw increasing demand for our products the portfolio from the UK balance sheet to
in Continental Europe, and believed the new French entity.”
that having a presence on the continent This involved a Part VII Transfer, which
would help us seize that opportunity is more common for multi-line insurers
and materialise it. Brexit accelerated that when they transfer portfolios and assets
process.” to support those policies and is a court
He adds: “As soon as the referendum approved process designed to ensure the
took place in 2016, we started working on transfer is appropriate for policyholders.
our strategy. The issue for us then was not This was finalised in October 2020, several
only being able to continue to write new months before the Brexit deadline.
business in the EU, but it was also essential “This meant that immediately we had a
for us to be able to service existing policies portfolio of 79 policies, approximately €6.1
– receive premiums, pay claims and make billion of exposure, that were transferred to
sure the policies we had issued in Europe the French company. Such policies were
up till then would remain enforceable for our almost exclusively in the infrastructure,
policy holders.” energy and public debt sectors,” says
AG took the decision to not wait until the Raphael.
last minute and to have a strategy whatever “At that stage, the French entity which at "We had a portfolio of 79
the outcome, opening the new company in that time only had a handful of policies that policies, approximately €6.1
early 2020 and identifying Paris as the ideal we had issued since the start of operations,
location given its central position in Europe, became a much larger operation.” billion of exposure, that were
communication links, and it being a vibrant transferred to the French
financial hub that is home to a number of The future beckons
key players in the infrastructure space. Having established the European
company. Such policies
France proved to be a welcoming host. beachhead and relocated a significant were almost exclusively in
“We had a lot of exchanges with the portfolio to the Paris company, it was time the infrastructure, energy and
French regulator that were very constructive to drive business which – for AG – has
and positive,” says Raphael. “That was recovered impressively from the lows of the public debt sectors."
another reason why we chose Paris – there global financial crisis.
www.ijglobal.com Spring 2021
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Brexit Special Report 2020
Sponsored by:
“Historically, our main focus had been "Finding opportunities where we that the sector has significantly matured
the UK as we had our capital and resources over the last few years and is now actively
there and the market was more comfortable can apply our infrastructure and considering entering this market as well.
with the monoline product and capital structured finance capabilities is
market issuances,” says Raphael. Traditional focus
“However, even before we opened in
a key part of our strategy going A cornerstone for AGE’s target business
Paris, we had already resumed issuing forward." across Europe will continue to be more
new guarantees in Europe – mostly in the traditional PPPs – concession-based
secondary market – and it has proved to Raphael de Tapol, Deputy Managing projects – a sector that has historically been
be one of our most active sectors in the Director at AGE active for monolines.
infrastructure space over the last 18 months. While this sector has been most active
“We re-entered the Spanish market in the UK PFI market, AG has remained
after having taken a pause after the global focused on European projects where – until
financial crisis and have closed four large “We could explore providing a guarantee recently – it has been challenging for the
transactions in just over a year – with both to the financing or refinancing of a portfolio wrapper to compete against local lenders.
the PV and CSP technologies – and we of solar projects which are backed by If AG is to operate in this space, it is likely
are actively working on deals that we are multiple corporate offtakers.” says Raphael. to be on big-ticket transactions.
hoping to close in the coming months.” “That is not something we have seen yet, “We like to be the controlling creditor –
These transactions all benefit from but with the speed at which the market the majority portion of the senior funding
regulated revenues – a preferred risk profile is moving and at which some big equity solution,” says Raphael. “For large projects,
for AG, perfectly aligned to the company’s sponsors are acquiring or developing new we need support for large capacity from our
historic activity. solar projects, this is something we expect investor base, something that has changed
“Whilst these deals have been a growth to see soon.” recently… mostly thanks to the deals we
area for AGE, the group carefully manages AG sees opportunity here for the future closed in Spain.
single risk and sector limits in order to – renewable energy projects backed by “For PPP projects, we may be able to
manage the effects of correlated credit corporate PPAs with the right level of guarantee senior debt up to €800 million
events. We will only be able to do so many diversification (industries and jurisdictions) per project and have seen evidence of
Spanish solar deals with regulated revenues as well as locations. investor appetite to buy wrapped debt up to
as a result,” says Raphael. This speaks to non-infra deals AG has that amount at very competitive margins.”
Beyond the Spanish solar market, AGE is closed in recent years: “In parallel to our Raphael adds: “This is interesting to
looking to diversify its broader renewables infrastructure segment which has been very sponsors for a number of reasons. The
exposure across Continental Europe, looking strong in Europe over the last decade, we universe of investors who have bought debt
for solar projects in other jurisdictions with a have been providing financial guarantees in wrapped by AG is global. We have seen the
similar risk profile. the structured finance space, in particular in wrapped solution attracting investors into
“We will be targeting individual solar the CLO sector.” jurisdictions and sectors that they might
projects backed by a PPA where the offtaker “Finding opportunities where we can not have been interested in without the
is a utility company, or any other entity for apply our infrastructure and structured financial guarantee. We have also seen
which we would normally guarantee the debt finance capabilities is a key part of our such investors taking bigger tickets if the
issuance – the likes of quasi sovereigns like strategy going forward.” says Raphael. debt is wrapped. From the sponsor’s point
universities or local authorities,” says Raphael. AG hopes to replicate the approach it of view – especially for those large financing
“However, we are fully conscious that has taken in the solar sector and apply requirements – with us acting as guarantor,
most solar projects being developed these it to onshore wind. Offshore wind has so we are the single point of contact.
days tend to be backed by PPAs where the far remained challenging for the monoline “That makes the whole process – not only
offtaker is a traditional corporate and that which – as is the nature of the beast – during execution, but also during the life of
is something we would not typically have tends to shy away from early-mover status the project – between the sponsor and the
credit appetite for on a standalone basis.” in an emerging sector, but AG recognises senior funder much smoother.”
"We re-entered the Spanish market after
having taken a pause after the global
financial crisis and have closed four large
transactions in just over a year."
Raphael de Tapol, Deputy Managing Director at AGE
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Brexit Special Report 2020
Sponsored by:
As to regional focus, AGE is targeting Structured finance & infrastructure Julián Pérez de Madrid
highly-rated European countries with experience
a particular focus on availability based One area that is of particular interest for AG
projects in Benelux, Scandinavia and – as previously mentioned – is the blend
France. It also continues to target toll roads of its capabilities in both structured finance
where the monoline has wisdom to bring to and infrastructure finance.
the table. AG’s Raphael de Tapol anticipates that
Talking about European toll roads, this combined approach could reap rewards
Raphael says: “We have been able to in the guarantee of portfolios of operational
observe how these projects have performed infrastructure assets held by banks. Similar
through economic cycles – most recently to the way AG’s products have helped
with the Covid-19 crisis. We believe that Solvency II regulated insurers to be efficient
we can be very competitive in this sector”. with their capital, AG believes that the
monoline’s product could be all the more
central for banks seeking the same benefits.
Stewart Robinson
“We have been approached by a number
of banks looking for our credit protection on
their existing portfolios for a range of asset
classes, not only infrastructure, as a means
for them to optimise the capital associated
with those assets,” says Raphael.
“If the portfolio shown to us by a bank Julián Pérez de Madrid, Head of DCM
consists exclusively of assets which at Banco Sabadell, Madrid
we are comfortable with from a credit
standpoint, then we could guarantee the “I have been working with Assured
entire portfolio and enhance the rating to Guaranty since 2018, achieving the
our credit rating of AA. We have done a closing of the first wrapped project
few of those over the last few years, largely bond in Spain since 2010. Up to date,
driven by regulatory objectives. But these we have arranged close to €1 billion
portfolio opportunities are also a way for us transactions with AG, and we are
to guarantee exposures that we probably currently working in projects of circa
would not be able to do on a stand-alone €400 million.
basis.” “AG is very flexible and committed.
This approach is opening the door to During the execution phase of a Project
opportunity for the monoline. Bond, it is standard to come across
“When banks come with portfolios of some complications. Assured Guaranty
Stewart Robinson, Managing Director, infrastructure assets that we would not always find a way to solve them in a
Power, Energy and Infrastructure at guarantee individually because they are in very constructive way, something that is
Cantor Fitzgerald a jurisdiction or an asset class we are not crucial to get transactions closed in form
comfortable with, we can guarantee a senior and time.
“Cantor have been discussing the AG portion of the portfolio,” says Raphael. “In our experience when placing a
wrapped bond solution with the global “Either the bank itself would retain a first- project bond, investors look at Assured
institutional investor base for a number loss tranche, or that first-loss tranche would Guaranty as a reliable partner and – in
of years. Each year and after each be transferred to a third party – which we our experience – appraise the benefit
successful transaction we see increasing may be able to facilitate. We could front-end of the guarantee in two main aspects:
demand for wrapped debt. Depending guarantee 100% of the portfolio and transfer giving comfort in the process of investing
on the institution this demand is driven that first-loss risk to another party.” and during the life of the investment,
by relative value returns versus other This is an interesting area of activity for basically through alignment of interests
highly rated debt, the improvement AG and – should the monoline be able to and awesome analytical team; and
in Solvency II or regulatory treatment, prove the value of its product to banks on letting investors meet the most
or simply de-risking for lenders existing assets – there is no reason why efficient yield / capital consumption,
entering new markets, sectors or this trend should not lead to an uptick in not only improving the credit rating
investing in deals with construction activity… even for new debt. of the investment but achieving an
risk. This demand is present across All told, having engineered impressive uncorrelated credit position.
major currencies and geographies recovery from the all-time low of the global “As lead manager, we also see AG
and Cantor are actively pursuing AG financial crisis, Assured Guaranty seems to as a partner. They help us to find the
wrapped transactions in Europe, US and be riding a wave of new business with the financial solution to our clients, both the
Australia.” French company playing an increasingly issuers and investors.”
vital role in this post-Brexit economy.
AGE is a joint stock company governed by the Insurance Code, with capital of €110.900.000 registered in the Paris Trade and Companies Register under number 852 597 384,
whose registered office is located at 71, rue du Faubourg Saint Honoré - 75008 Paris, France. AGUK is authorised by the Prudential Regulation Authority and regulated by the
Prudential Regulation Authority and the Financial Conduct Authority. AG is Assured Guaranty Ltd, together with its subsidiaries.
www.ijglobal.com Spring 2021
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Brexit Special Report 2020
The post-Brexit future
of the UK fund
In the run-up to Brexit, many UK-based fund managers shifted
domiciles to Luxembourg – but for now, much of the business
operations remain in Britain. Whether it will stay that way
depends on future relations and EU ambitions, writes
Ott Tammik
Since the EU referendum, an estimated The consequences, such as staffing
£1 trillion in assets and thousands up in Europe, are still evolving but have
of jobs have moved from London to been playing out since the referendum.
Europe, according to analysis by EY. The In a nod to this trend, placement agent
statistics have become more palpable Campbell Lutyens, which supports
in the months since the transition period funds on their capital raising activities,
came to an end, with Amsterdam taking recently opened an office in Paris,
London’s place as Europe’s biggest saying it “enables the firm to continue
trading centre and the risk that other supporting its clients and investors
services from derivatives to bonds are effectively following the UK’s departure
following. from the European Union”.
For the UK’s financial services
industry, the last-ditch trade deal Losing the passport
agreed in December 2020 (which has In January, the UK has shown it is keen
been bogged down by further delays) to cooperate in financial services by
has been a frustrating “no-deal”. With adopting the EU’s regulatory framework
Europe holding all the cards, as one for private funds (the AIFMD) as a
fund manager puts it, the UK and EU British law and granting market access
have still yet to hash out a framework for to the EU in a number of areas based
the financial sector, with an MoU initially on “equivalence” – a legal recognition
due before the end of March. of the other’s regulatory rules. But, as
Two of the biggest challenges facing lawyers point out, the main benefit of
fund managers in particular are the loss the somewhat problematic EU fund
of passporting rights – which allowed regulation was passporting, which no
them to raise capital from investors longer applies.
across the EU – and certain capital Fund managers based in the UK –
regulations that will push institutional historically home to a big portion of
investors towards a preference for EU infrastructure funds – are having to
funds over non-EU funds. find workarounds to gain access to
In particular, the loss of passporting European institutional investors.
is an issue for core infrastructure funds, For large financial firms with a strong
which have been popular with EU European presence, the loss of UK
investors, whereas core+ strategies passporting rights is a mere technicality
have been more popular with US and with little impact, but for plenty of funds
Asia investors. it is a problem – particularly in the
www.ijglobal.com Spring 2021
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Brexit Special Report 2020
Oliver Crowley Germany. Moreover, private placement is Luigi Pettinicchio
not available in countries like France, Italy,
Spain and Austria.
“In some countries private placement is
simply not a viable option, which makes
them very problematic for certain managers
targeting investors,” says Crowley.
Another problem is that the European
Securities and Markets Authority (ESMA),
which for years has been clamping down
on offshore shell companies, has indicated
that it could further restrict white-labels and
reverse solicitations. For instance, it could
increase substance requirements – the
minimum threshold for staff on the ground
in Europe. It is part of a landgrab by the
"In some countries private EU, but also “understandable from an EU
placement is simply not a perspective”, says one London-based funds
professional.
viable option, which makes
them very problematic for Institutionals face regulatory capital
certain managers targeting requirements "Our client base is composed
Nevertheless, unless you’re a fund manager
investors." with lots of investors in countries that don’t
of institutional investors,
have a private placement regime – which including in the EU and the
haven’t historically been huge allocators of UK, so preserving the ability to
infrastructure market and particularly smaller capital to UK infrastructure fund managers
UK-based fund managers that previously – then the private placement route may not market effectively post-Brexit is
relied on passporting. really be a problem, says James Sargent, a of strategic importance for our
“This is more problematic for the smaller partner with Weil Gotshal & Manges.
“Ultimately, you can access a lot of EU
business."
funds – those typically in the sub-£500
million range – and those with no presence investors with a UK structure. You just have
in the EU wanting to market across Europe,” to go through a different way of doing it,”
says Oliver Crowley, a partner at Pinsent says Sargent.
A bigger concern for some managers in passporting rights. Its current approach
Masons.
the wake of Brexit is that EU insurers and is to keep its options open: working with
“For others who have had to set up
German pension funds – a big portion providers of fund administration services in
operations in the EU as a result of Brexit, it
of the infrastructure investor base for a Luxembourg and analyzing national private
is still an additional cost.”
number of core infra funds – are subject to placement rules.
UK-based funds that previously relied on
regulatory requirements that disincentivize Furthermore, Asper has recently
passporting, now have three main options
them from investing in non-EU funds. established a subsidiary in the Netherlands,
for fundraising in the EU (aside from setting
Due to Solvency II rules and the German which it says was driven by other
up EU operations, typically in Luxembourg
Investment Ordinance, institutional investors operational needs to have local resources,
or Ireland):
have to hold less regulatory capital for EU but the office also facilitates the option of
• so-called private placements – national
funds than for non-EU funds. As such, setting up a local fund if needed in the near
frameworks that allow market access on
investors that previously invested in UK future.
a country-by-country basis
funds, will likely be putting their money in “Our client base is composed of
• white-label service providers –
EU funds going forward. institutional investors, including in the EU
companies that set up EU funds on
and the UK, so preserving the ability to
behalf of UK-based managers and
Keeping options open market effectively post-Brexit is of strategic
delegate much of the work to the latter
London-based Asper Investment importance for our business,” says Luigi
• reverse solicitation – EU investors seeking
Management tells IJGlobal that it has Pettinicchio, co-founder and chief executive
out a UK fund on their own initiative
domiciled its latest funds in Luxembourg of Asper.
due to Brexit. While market players say a full-scale
But there are a number of challenges
Asper – which focuses on energy exodus of the funds business to Europe
with these options. In the case of private
transition infrastructure with a value-add seems unlikely, it seems safe to assume
placements – which firms from non-EU
strategy and counts Dutch pensions that as time goes on, a lot will be
countries like the US have used – these
group APG among its investors – recently determined by where investors are based.
arrangements are different in each country
concluded fundraising for a €250 million In the meantime, the UK is seeking ways
and can be complicated.
co-investment platform. to become more competitive outside the
For instance, it may take just a few weeks
The firm is weighting its options for EU, with HM Treasury currently reviewing the
to get fund marketing set up in Luxembourg
future fundraisings in light of the loss of UK funds’ regime.
– but it could take several months in
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Brexit Special Report 2020
It’s a long way to Frankfurt
IJGlobal reporter James Remember back to the simpler, more
innocent times when the worst thing you’d
Neither ‘hard’ nor ‘soft’ Brexit, but a
separation process with no free trade
Hebert takes a look at hear about Brexit in the news was the regime in place.
total capitulation of the UK economy due Finally, the EU-UK trade deal was
the lending environment to relocations to Frankfurt and mutilated signed on 30 December 2020. Despite
Toblerone bars? a clearer picture for businesses dealing
for infrastructure across Even with a deal – the EU-UK Trade in physical goods, the financial services
Europe as the reality of and Cooperation Agreement – now in
place, the British economy is currently
sector is still more or less waiting for a
deal – the topic of finance was largely left
Brexit becomes (kind of) reeling from a GDP shrinkage of 9.9%
for the year 2020, towards which the
out of the negotiations for the EU-UK deal,
which was otherwise focused on more
apparent… Covid-19 pandemic played a uniquely visible industries and labour movement.
large, deleterious role. A bank source told IJGlobal: “Frankly
Maybe the gloomiest predictions were most banks have just been playing
right about the state of the economy after the long game in terms of reacting to
Brexit – but for the most part 2020 wasn’t the issue because I think there was an
due to the risks of Britain attempting to go expectation that there would be a softer
out into the world alone, but rather Britain form of Brexit and that clearly hasn’t come
having to stay inside. to pass.”
As the vaccines are rolled out On the other hand, there is also an
nationwide, some minds are turning to the upbeat mood in the response to the deal.
post-pandemic period, such as whenever Charlie Hodges, a managing director at
we can go back to watching football financial adviser Augusta & Co believes
games without the FIFA sound effects. that “international investors look set to
The size of the economy will recover, deploy growing amounts of capital here.
but it will be adapting to the new trading There is a strong belief that the energy
relationship built across the channel. market is well regulated and perception
Inner London may not have much fish, that currency risk is manageable.”
but it’s still home to the largest financial The common factor in both of the
sector in Europe… complete with its above statements is that it’s yet too early
energy and infra lending market. However, to conclude on the EU-UK trade deal
while the new fishing rules have been as either a success or failure for energy
made clear, there is still uncertainty over and infra project finance – agents in the
the services sector in the new EU-UK market are still operating on expectations
deal. and belief.
Now that the UK has officially left the
European Union, how much closer are we What are the current impacts?
to seeing the effects Brexit will have on It was evident on the morning of 24
energy and infra lending in the UK? June 2016 that neither the sky had fallen
on our heads, nor had a resuscitated
The status of the deal Winston Churchill appeared to pull a
Approximately three years ago, perhaps sword out of a Yorkshire pudding. The
the biggest question arising from the Leave campaign had won, but the short-
referendum result was whether there term impacts of the vote would take much
would/should/could be a Soft Brexit or longer to appreciate.
a Hard Brexit – very much the “Oasis or It would inevitably take time to assess
Blur?” of the 2010s but with fewer hit the effects and the financial sector isn’t
singles. special in this regard. Nearly five years
Eventually, as the end of the transition later, many in the industry are operating
period approached in December 2020, on the expectations of Brexit, rather than
the primary question morphed into the whatever effects it currently has.
more alarming “will there be a trade One European bank executive told
agreement at all?” and the most urgent IJGlobal that, so far, the impacts that
prognostications about Brexit were then have been felt across the industry depend
attached to the prospect of ‘no-deal’. on the department: “We are starting
www.ijglobal.com Spring 2021
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Brexit Special Report 2020
to see the most obvious and apparent and that some banks are simply more Alistair Higgins
impact on our business is that when we prepared than others: “Take for example
look to originate and underwrite loan BNP Paribas, they had a presence in both
facilities our syndications capacity that we Paris and London so they didn’t have to
have in London can’t talk to investors in make such drastic changes out of the box.
the European space. We have to talk to Out there is where you have your sales
them via our European located distribution professionals because those still need to be
colleagues. domiciled in the jurisdictions where they are
“So, as in the past we might have had booking trades. Therefore, you’ve seen quite
one deal run from our London office and a substantial shift in terms of how clients
selling loan assets into Europe or even are being spoken to and discussed…
underwriting loan assets in Europe and transactions in terms of who their critical
distributing out of London. Now when point of contact is.”
speaking to EEA domiciled investors in the McCarthy adds: “If I did have to pinpoint
primary market, you may find two people a place where there has been some activity,
from one bank on the phone call with the I would go for Luxembourg. Some banks
same client so that technically our London have been using this as an opportunity to
based colleague isn’t talking without the get a foothold in continental Europe whilst
surveillance and oversight of a European perhaps optimizing their tax situation at
qualifying individual. So that is a very the same time. The view from these shops
apparent impact.” seems to be that there is no city which
Dan McCarthy at One Search provides a seems particularly attractive to their existing
different response to current impacts: “So far, staff, or indeed which might help them,
I have seen more evidence of people trying attract talent, so they choose Luxembourg
to take advantage of [Brexit] than I have based on cost effectiveness. "The key issue for European
companies. For example, people know that “Certain platforms have been trying to
they can get a better compensation package induce continental European nationals banking in the next 5 years
in London than they can in, say, Paris. But if to move to the continent, but it is difficult will likely be the repercussions
they can get the London job and only have to get people to leave London – the vast
to physically BE in London two days every majority of continental Europeans don’t want
of Brexit, rather than the
fortnight… perhaps they can win on this to go back. London has everything – no pandemic."
trade. We also see candidates for roles who European capital compares to it for overall
are working for a more rigid business actively quality of life. In Amsterdam you can park
looking in the market, greatly attracted by the your car opposite the office – that’s the best Alistair Higgins, a managing director at
flexibility being shown by others.” argument I’ve heard for going there.” ING Bank told IJGlobal: “I think inevitably
As expected, these current impacts are yes. There will be a lot of that taking
rather limited. In addition, the extent to Will any changes made during the place but it’s very difficult to know… the
which these are either significant hurdles pandemic be crystallised by Brexit? management of a company is not going to
or big benefits for lenders both appear As already mentioned, the oft-predicted go and say ‘we’re doing this now because
minimal. economic turbulence caused by a rocky of Brexit three or four years ago’, they will
exit process (whether because of a Hard say it is part of a general rebalancing in light
Whither the exodus? Will lenders be WFH Brexit or no-deal) was nonetheless a major of everything.”
(working from Holland)? side-effect of the pandemic declared by the Talk of ‘rebalancing’ or ‘restructuring’ has
This was one of the doomsday scenarios World Health Organisation in March 2020. been heard in many companies across
talked up for Brexit – the prospect of banks The pandemic has (virtually) shaken up the region, even during the pandemic
and bankers alike moving wholesale from the way many companies do business. If the healthcare sector and healthcare-
London into another city across the channel, the banks were aiming to make any Brexit- related research industry have not been
where EU member-states offer unrestricted related changes, has the pandemic brought invulnerable to personnel shifts and
access to the EU27 single market. How is them forward? Has Covid-19 mutated with redundancies. As the UK Chancellor, Rishi
this going, anyway? Brexit-16? Sunak, recently announced the furlough
McCarthy answers: “I have not seen one When asked about any hybridisation of scheme is set to continue past April and last
single instance of a critical/senior deal Brexit and pandemic, McCarthy responds: until the end of September (2021), clearly
origination role in frontline M&A or project “I have not seen any evidence of this. The responding to concerns from businesses
finance being moved from London to the businesses that didn’t need to be in London over the possibility further layoffs.
continent – which is just as well for the had already presumably gone through this
institutions concerned. Most people in these thought process in the past or were not So, what about the financial sector?
positions are in great demand and if told there in the first place. If you are a front Higgins says that ING Bank is “in some
their role was being relocated, they could office, client facing business/business unit regards fortunate that we don’t have an
easily stay in London and get a comparable which needs constant access to the market, overweight presence in the UK. So, we are
role with another firm.” to your customers and other third parties, unlikely to see substantial reductions in our
One unnamed source however hinted you need to be in London, and businesses UK presence but that’s not true of every
that the opposite process is taking place, understand this.” institution…
www.ijglobal.com Spring 2021
9
Brexit Special Report 2020
Bart White Brussels. Naturally, this train of thought has opportunities for companies both large and
enabled the creation of a highly efficient small.
financial sector in London ever since the White adds: “Furthermore we anticipate
‘big bang’ of deregulation in 1986. minimal impact on liquidity for new deals, as
However just like White at Santander, whilst a handful of international lenders are
Higgins is speaking from the perspective of stepping back and focussing on their core
a European bank that would be concerned geographies, the UK will similarly benefit
by any new red tape that affects their entry from heightened attention from its own long
into the UK market. list of domestic lenders.”
In his words: “Brexit is going to have a There is however consensus on the
very material impact on the financing of importance of London and here is where
infrastructure post-Brexit, because the whole the discussion turns entirely macro.
market is more defined by regulation today Whatever the view is on Brexit, the UK’s
than ever, and the central premise of Brexit capital city is still highly prized for its
is contention over regulation.” economic status – which goes against the
grain of some pro-Brexit narratives. After all
The lack of consensus a majority of Londoners voted Remain, while
As already remarked, it is too early to many Leave-supporters outside the capital
conclude what effects the EU-UK trade have been content to depict the capital as
deal will have on the energy and infra filled with out-of-touch elites more likely to
"In terms of pipeline of lending market. There is no consensus as drink highly carbonated Belgian beer than
yet – it is still at the point where the void real ale.
opportunities we remain bullish of uncertainty is easily filled with either In some ways Brexit has necessarily been
on the UK for infrastructure & optimism or pessimism, just strike out ‘anti-London’. Many people in the market
project finance over the near- whichever mood appeals. have expressed concern that the EU-UK
Furthermore, the short-term expectation trade deal provides more regulatory clarity
term at least." of increased red tape and reduced on fishing – which is a highly visible industry
economic growth – which was a possibility with plenty of pictures for local papers and
not discounted by some in the Leave camp a wealth of puns for headlines – than on the
“Take French banks for example, they over – has been rather upstaged anyway by the financial sector.
the last 15 years chose to have the UK as impact of the Covid-19 pandemic in 2020. That’s not to suggest that banks have a
their principle base of operations because In the UK energy and infra spheres PR problem, but rather there is something
there was a more flexible workforce and a since June 2016, many projects were inherent to Brexit that inevitably pits
better ability to get business done and for able to achieve financial close in spite of London on the losing end. Not enough
them I think there could very much be a some having Brexit-related issues cited by fish, no shared border with Ireland, and
series of progressive cuts, reshuffles, and the people involved when they spoke to no masses of Europeans taking up the
moves to get that European centre of gravity IJGlobal: managing director jobs in Canary Wharf.
back which would naturally be their starting • 42MW Newhurst waste-to-energy – There is simply no consensus on how
point. sponsors took a bet on the supply of hard the UK’s energy and infra lending
“The key issue for European banking refuse derived fuel (rdf), which could be will be hit, regardless. On one hand…
in the next five years will likely be the affected by a drop in rdf exports to EU Higgins says: “I think [Brexit is] going to
repercussions of Brexit, rather than the member-states be pretty detrimental to Europe as well
pandemic.” • A465 motorway PPP – lenders “did as the UK, but as Phillip Hammond [UK
not have visibility of the risk” involved, Chancellor from July 2016 to July 2019]
The regulatory sphere including tax implications and movement rightly observed, it is a political outcome
Bart White is head of structured finance at of labour rather than an economic one, and sadly
another European bank with strong interests the repercussion of that is that in the round
in the British market, Santander Corporate The bottom line is that these deals were there will be more significant downsides
& Investment Bank UK. He “remains bullish” nonetheless successful and other transactions to be weathered for most people in and
but adds that – over time – “the ‘unknown that have achieved this feat in recent times outside the industry.”
unknowns’ may come from the impact of did not appear to have any concerns of However, on the other hand… Hodges
regulatory deviation vs the ECB.” the type at all, such as the Dogger Bank says: “There will be some long-term
Higgins: “[The] Brexit related changes are Wind Farm projects and Seagreen Offshore pressure, likely from higher inflation and tax
tangible and real and one thing that has Wind project – both of which were project rates, but this is not unique to the UK and
driven the market over the last 10 years and financed on the back of multi-billion pound, I sense that the returns will be resilient to
will for the next 10 years is regulation and ECA-backed debt tranches. potential macro headwinds. The UK is open
that’s not going away.” White at Santander says that “in terms of for business and the worst of the uncertainty
One of the most prominent arguments pipeline of opportunities we remain bullish that has dogged the market in the past four
wheeled out for Brexit is the opportunity on the UK for infrastructure and project years is over (rightly or wrongly!)”
to cut yet more red tape and reduce – if finance over the near-term at least.” A look So, there it is – the post-Brexit clarity on
not remove wholesale – the amount of at the EU’s Tender Electronic Daily portal energy and infra lending now clarified: it’s
the much-dreaded regulation drawn up in still shows dozens of listings for UK infra not clarified.
www.ijglobal.com Spring 2021
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