Acknowledged Leadership that Leads to Advantage
Major financial institutions and privately held trust companies from around the world rely on Richards Layton for advice concerning their roles as trustees or agents in complex financial transactions. These are often carried out by using the unique advantages of investment vehicles created as Delaware statutory or common law trusts.
Our firm played a leading role in drafting the Delaware Statutory Trust Act in 1988, and since then we have been in the forefront of keeping Delaware trust law current with the latest financial market innovations and changes in other laws and regulations. This leadership role in ongoing trust law evolution means that our clients are often consulted before changes are proposed and among the first to be informed of the latest Delaware trust law changes, giving them a significant competitive advantage in the marketplace.
Core Practice
Business trust and agency services is a sideline at other firms, but it is a core practice at Richards Layton. In addition to our having Delaware’s largest business trust law practice, we also serve clients through the work of the largest alternative entity practice in Delaware, with 26 lawyers dedicated full-time to the structuring of general and limited partnerships and limited liability companies under Delaware law.
Size is not the only measure of the value that we bring to our business trust and agency services clients. Most of the lawyers in the business trust and agency services practice have focused their entire careers in this area, and several of our senior directors have decades of experience that predate the passage of the Delaware Statutory Trust Act.
We understand the nuances of Delaware trust law, which means that our opinions are authoritative and that we can move quickly when market conditions demand—an exceptional advantage to clients in times of turmoil, such as when the prospect of a counterparty’s default or bankruptcy threatens the integrity of a transaction. Richards Layton lawyers are responsive, thorough and insightful in the ways that we help clients handle problems and pursue opportunities.
CASE STUDY: Maintaining Delaware’s Trust Law Advantage
- Clients: Benefiting from our work are all institutions that participate in the public and private capital markets, including the many leading commercial trust institutions in the U.S. that are Richards Layton clients.
- Issue: In 1988, lawyers from Richards Layton were instrumental in drafting and securing passage of the Delaware Statutory Trust Act, which created the statutory trusts that have become the vehicle of choice for structuring complex financial transactions and for the formation of public and private mutual funds and exchange-traded funds.
- Challenge: Ongoing evolution of financial products, particularly in the areas of structured finance and securitization, requires ongoing review and revision of the Statutory Trust Act to keep it dynamic and effective for financial client use.
- Solution: Since the passage of the Trust Act, a Richards Layton lawyer has chaired the Statutory Trust Committee of the Delaware State Bar Association. The committee regularly reviews financial market issues and recommends changes to the Delaware General Assembly, which typically amends the Trust Act in line with this guidance every two years. Another Richards Layton lawyer is on the ABA’s Committee on Trust Indentures and Indenture Trustees, representing commercial trust institutions’ interests in the development of the law with respect to indentures and debt securities.
- Result: Although nearly a dozen states have established statutory trust authority and a uniform statutory trust act in progress, the State of Delaware continues to be the leader in evolving statutory trust law that supports sophisticated financial transactions—a leadership that conveys significant benefits to Richards Layton clients.
Complex Transactions
As pioneers in the development of structured finance transactions, such as leveraged leases and collateralized mortgage obligations, we have a proven track record of representing trustees in these complex deal structures. We advise major banks and privately held trust companies on their roles as trustee or agent in Delaware statutory or common law trust arrangements in sophisticated transactions that involve:
- Derivatives and swaps
- Asset-backed securities
- Leveraged leases
- Collateralized loan and collateralized debt obligations
- Hybrid capital securities
- Creditor trusts
- Tender option bonds
- Medium term notes
- Covered bonds.
Trust Formation
Richards Layton lawyers played a historic role in the 1980s to help make Delaware a leading jurisdiction for both structured finance and securitization transactions, thanks to the contractual flexibility afforded by Delaware statutory trusts. We use our in-depth knowledge to tailor Delaware statutory trust agreements to create bankruptcy-remote entities that are favored by rating agencies and investors alike. To do so, we work closely with:
- Commercial banks
- Investment banks
- Issuers
- Credit enhancers
- Underwriters
- Investors
- Other transaction parties.
No other Delaware law firm surpasses our experience at structuring Delaware statutory trusts, which is the issuer of choice in securitization transactions. In fact, our lawyers have formed more than half of the Delaware statutory trusts created in the last five years.
Sophisticated Advice
Because many trusts are created for limited purposes that vary by the type of transaction, we excel at providing advice and legal opinions on the use of statutory and common law trusts in the full variety of deal structures in which they are used. Clients benefit from the kind of insight that our lawyers have demonstrated as authors or co-authors of such treatises as “Delaware Statutory Trusts” in The Delaware Law of Corporations and Business Organizations, “Advantages and Uses of Delaware Statutory Trusts and Limited Liability Companies as Bankruptcy Remote Entities,” published by Bloomberg, and “Role of the Trustee in Leasing Transactions,” published by PLI.
Our guidance is based not only on our deep knowledge of Delaware law; it also reflects our capabilities as established and experienced counsel in structured finance transactions that include project and equipment finance, securitizations, collateralized debt obligations, derivative/secondary market financings and many others.
CASE STUDY: Dealing with the Global Financial Crisis
- Clients: A wide range of global financial institutions.
- Issue: The global credit market crisis that emerged in 2008 has directly impacted asset securitizations, derivatives and other complex structured finance products that use Delaware statutory trusts as the legal entity to protect the underlying assets.
- Challenge: When in crisis situations, clients have turned to our firm under extraordinary circumstances and tight deadlines to maintain asset integrity—when counterparties faced default, forced mergers and even bankruptcy.
- Solution: Having worked through past financial crises, including those involving S&Ls and technology companies, our lawyers have helped many clients maintain their structured finance programs. For example, we help them structure transactions that enable them to take advantage of federal government restructuring efforts despite tremendous market pressures.
- Result: Richards Layton business trust and agency clients have used our help to maintain the integrity of their existing transactions, and in some cases to secure new market opportunities created by the financial difficulties of other investors.
Summary: Comprehensive Advantage in both Challenging and Good Times
Richards Layton’s mastery of Delaware business trust law is a comprehensive advantage for our clients. We craft their statutory and common law trust structures to take the full benefit of Delaware law, offer insightful guidance as the capital markets and applicable law evolves, and respond immediately when market needs dictate. Whether helping clients to anticipate problems or seize opportunities, our lawyers require no learning curve. Our firm’s complete commitment to continue to develop and expand our business trust and agency services means clients can rely on us for years to come, no matter what economic or financial challenges emerge.