Friday, September 16, 2011

Lawyering 101: Basics for the cap mkts corporate monkey lawyer

i am no cap mkts lawyer, nor do i aspire to be one. god no. altho with the mkt in the crapper these days i wdnt mind. nor am i really an ma attorney. fuck im not even really a lawyer, at least not at heart. not many people are i think.

however, i have done the soem o the shit that they do so kno a bit about what its like to be one. i wrote about it before. oh this hole blog is about it isn't it. well. in this series of posts, im hoping to inspire young wannabe cmls to actually, really, understand wat these lawyers do. for better or worse.

cap mkts, as ive said, is kinda like a meat grinder. u throw a bunch o random shit into a big funnel and subject that shit tos ome serious cranking - pressure, torque, some random rich dudes pube-laden beer belly as he turns that crank over an dover, and out comes some formulaic grade a shit. in real terms, i'd say that whole process is broken down like so:

  • disclosure preparation phase
  • documentation phase
  • execution phase
whether ur working on debt or equity, its still the same, just some parts r more exaggerated. and dependon how fast that unclefucker is turning the crank, these phases will overlap a lot or a little. 

in phase 1, u prepare a disclosreu doc, like a prospectus or offering memorandum or soemthgn. there's "dd" involved. let's jsut get this straight, when jr associates do "dd" for capital markets, despite what u hear and what u read in ur guidebooks, u most of the time go and sit in a room at the company (which is hopefuly located in paradise) and flip thru pages as quick as posisble for a few hours. go have drinks or a meal with the co. dudes who dont care who u r but like that ur young and a' 'gogetter' and get u drunk and u end up in a pile of feces or vomit or both in some gutter in zurich with a horse fucking prostitute peeing on u, from her horse. repeat for a week. or if ur have an e data room, u just do all that from ur desk. cant rememebr a single time something i noted in dd actually affected or made a difference int he disclosure. the real 'dd' is management dd, where the banks and the seniro people talk tot he companh and just ask them questions - 'is the company ok? r u lying to us? ur not just making up these numbers right?' and thecompany will say yes because it wants money. there's a lot of back and forth on the document, as a junior u end up just transcribing comments, scannign stuff, reading about things that m ake ur eyes bleed and the blood from ur eyes cry. yes, that's crying blood from ur eyes. look at any book when its done, kits still riddled with errors and shit, no one gives a shit. its a 'cya' doc. lawyers job is to put as much risk averse shit in there so that their client doesnt get sued. or loses. (first hign i learned tho on the job was that for 144a/reg s deals, and especially reg s deals, no one ever sues. awesome.) bankers job is to make the book sound good so it sells well. honestly, they can't write so they often delegate taht to the lawyers...conflict of interst much? anwyay, they sell everyting on the roadshow anywayher where they say watever the fuck they want. 

in phase 2, documentation, lawyers draft all the docs. there's usually a purchase agreement for buying the stufff from the company, then there are all these random things that banks get with the deal. comfort letters from auditors. legal opinons from counsel. arrangement letters for auditors. rep letters from banks to auditors. (audtiros suck byt he way.) and any ancillary docs - sometimes there are pledges, lockups, blood letters, blah blah. agreements among underwriters. here's a tip - a lto of this stuff is in standard forms - try to get peopel to sign up to that. like AAUs can just be incorpoated by reference. sometimes banks alreayd have signed master ones between them. sometims banks have agreed forms with auditors. rep letters are basically cut n paste. no one cares about legal opinons. no one reads comfort letters in the end. dont sweat it. my philsophy, this is just cya too - make the docs good enough so u dont look stupid when someone else goes back to look at it later - who will undoubtedly be some other cml. 

in phase 3, execution, its just being on top of the ball. i get like hudnreds or thousands of emails in the period beetween launching, pricng and closing - usuallly this happens in 2 weeks. it's all chasing paper. i wrfote abotu this before. 'throwing turds' i like to call it. at closing usually u ahve like a billion certificates and shit that need ot be delivered and someon has to sign that shit. of course its the lawyers job to make sure it goes right. company people dont care and will get pissed off at u if u dont tell thme. ay yes, that's the rub. no matter what happens. in these daeals, banks and issuers just dont give a hshit. it so formulaic - the process - the docs - etc., that u dont get any respect for the monkeying that u do, yes lo skill, but also lot of shit to deal with. and they just get angry if little things dont go ur away. the angriest ive seen someone get on a cap mkts deal is when one banker changed the position of another banks name on the cover. they were rip shit. at us. super. 

as for timing, in ipos, the first phase is really long because for some reason its more important. the next two phases r still there but take a backseat. for debt, usually it all accelerated so maybe eerythign in a month or two, depending on other stuff. whent he disclosure doc is all done, u 'launch' the deal. launch means banks go on a roadshow. usually 10 days or something. when that's done u 'price'. thats when u stay up and sign the purchase agreement, because it take s 12 hours usually to finagle a price by 0.1% which is based ona table anyway and then to 'sign' something. awful. then usually one week later, sometimes sooner, u close. which is when bonds r issued. the delay is really only to give laweyrs the time (barely) to do everyting. u shld just copy and paste this into ur capital markets final exam and see wat ur prof says. A+ all the way baby!!

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