Practice Areas & Industries: Cadwalader, Wickersham & Taft LLP

Practice/Industry Group Overview

A municipal swaps practice that is "second to none"
 - Chambers Global 2007 

Cadwalader’s Municipal Capital Markets Group is a nationally recognized leader in derivatives, tax-exempt debt securitization, and project financings for public and private/public facilities. Formed in 1989, our Group has been involved in countless ground-breaking developments, many of which have set the standard for today’s financings. Our clients include the world’s most respected financial institutions, who value our creativity, technical expertise, sophisticated market knowledge, and transaction execution.

To resolve the complex multi-faceted issues associated with these financings, our Group is integrated with Cadwalader’s 169-attorney global Capital Markets Department, and also draws upon the expertise of attorneys from other areas of the firm with knowledge of capital markets products, including tax, bank regulation, securities and commodities laws, insurance regulation, insolvency, pension plan regulation and, when necessary, litigation.

Clients of the Municipal Capital Markets Group include commercial and investment banks, financial guarantors, financial products companies, investment advisers, registered investment companies, hedge funds, electronic trading platforms, government sponsored enterprises, institutional investors, and others. In addition, we have represented the International Swaps and Derivatives Association, The Bond Market Association, the Securities Industry Association, and the Association of Financial Guaranty Insurors.

Municipal Derivatives
As one of the first law firms to become a member of the International Swaps and Derivatives Association, Cadwalader has been involved in the development of many of ISDA’s policies and documentation projects over the years, including the 1992 and 2002 Master Agreements, the 1992 Municipal Counterparty Definitions, the municipal float contract provisions, the 1999 and 2003 Credit Derivatives definitions, and many others.

The Municipal Capital Markets Group helped establish the initial policies and documentation for several of the largest municipal derivatives dealers in the market today, and has continuously represented them since their inception. Among our many “firsts” is the representation of the swap provider in the first-ever long-dated swap written at the actual rate payable on variable rate demand bonds. We have also helped several of the world’s largest derivatives dealers reorganize their companies and/or create affiliates or joint ventures to enable them to develop and market new products within applicable regulatory, rating, tax, and capital limitations.

As a recognized leader in the municipal derivatives market, Cadwalader has often been called upon to draft or review proposed legislation authorizing municipalities around the country to enter into derivatives transactions.

Notable recent engagements in which we have been instrumental in structuring new developments in the municipal derivatives market include:

• Serving as counsel to the International Swaps and Derivatives Association to develop standardized documentation and procedures for credit derivatives involving state and local government “reference entities.”
• Serving as counsel to the New Products Committee of The Bond Market Association, including providing advice on the development of its guiding principles for the Municipal Derivatives Market.
• Creating several programs between highly-rated swap dealers and regional dealers for the marketing of swaps to customers of the regional dealers.
• Structuring an arrangement for a swap dealer to buy protection in the form of credit derivatives on the credit risk of its municipal counterparties.
• Synthetically refinancing high coupon fixed rate tax-exempt private activity bonds through a structure that combines securitization of the bonds and a total return swap with the nonprofit borrower of bond proceeds.

Municipal Securitization
Our Municipal Capital Markets Group is a market leader in secondary market tax-exempt securitizations, including representation of several of the largest sponsors of tender option bond programs and auction rate programs, as well as a wide variety of investors in the short-term and residual classes of these programs. For example, we represented two “AAA” institutional investors, as well as one of the world’s largest hedge fund managers, in the first leveraged financing of their tax-exempt portfolios. Among our many “firsts” in this market is the representation of the underwriter and issuer in the first registration with the Securities and Exchange Commission of pass-through interests in pre-refunded municipal bonds.

We were retained by an ad hoc group of eight sponsors of tender option programs to assist them in discussions with the Internal Revenue Service regarding a proposed change in the treatment of certain aspects of these programs and to develop industry-wide procedures and documentation to comply with the new Revenue Procedure that ensued from such discussions.

Notable recent engagements in which we have been instrumental in structuring new developments in the municipal securitization market include:

• Creating the first secondary market program to arbitrage credit spreads on tax-exempt bonds.
• Structuring the secondary market funding and credit enhancement of a $1 billion unrated, illiquid tax-exempt loan.
• Developing a tax-exempt securitization program that includes an auction rate mode for the floating rate certificates.
• Creating municipal credit derivatives as the synthetic assets of a multi-sector CDO.
• Creating stripped municipal bonds as assets for a leveraged hedge fund investment using total return swaps.
• Designing a program to securitize and credit-enhance unrated variable rate tax-exempt notes to permit the issuance of rated variable rate trust receipts.
• Developing the first tax-exempt securitization program for multiple high net worth individuals to invest in the residual receipts issued by the trust.
• Structuring reimbursement arrangements for secondary market credit enhancement in the form of derivative transactions to permit netting of exposure under other derivative transactions.
• Creating interest-only strips off fixed rate tax-exempt premium bonds, and securitizing the principal amortizing receipts.

Public and Private/Public Project Finance
Our Municipal Capital Markets Group has expertise in structuring and documenting a wide range of complex public and private/public financings for transportation, office, industrial, multifamily housing, and power facilities, involving the issuance of tax-exempt or taxable debt, lease-based financings, and mortgage financings. These structures often include credit derivatives, like-kind exchanges, credit enhancement, guaranteed investment contracts, defeasance arrangements, insurance products, or a combination of derivatives and securitization techniques. Clients and issuers look to our experience to address the unique tax, accounting, regulatory, legal enforceability, and public policy issues that are raised by these financings.

Notable engagements in which we have been instrumental in structuring new developments in this market include:

• Financings for airport expansions (Newark, New Jersey and Miami, Florida), railcars (Metropolitan Area Rapid Transit of Atlanta, Washington Metropolitan Area Rapid Transit, and Amtrak), railcar and bus maintenance facilities (Boston’s MBTA and Los Angeles’ LACMTA), generating plants and transmission facilities (Florida’s Seminole Electric and Gainesville Regional Utilities, Oklahoma’s Western Farmers Electric, and Kentucky’s Big Rivers Electric), and municipal office centers (City of Gainesville, Florida).
• Structuring the first tax-exempt variable rate financing for a governmental entity's prepayment of a 10-year supply of natural gas, using a liquidity facility to provide for the payment of variable rate bonds and multiple swap agreements to hedge interest rate and gas price risks.
• Representing a financial institution in extending loans and executing total return swaps secured by subordinate mortgages on low-income housing facilities.
• Structuring a credit default swap to serve as the reimbursement arrangement for the U.S. branch of a foreign bank that purchased a 100% participation in a $700,000,000 letter of credit securing payment of municipal debt.
• Securitizing loans to finance military housing and structuring forward-starting derivative transactions to hedge changes in interest rates.