Fireside Chat with Robert Farrell
27 March 2023
Robert Farrell is a Partner in the firm’s Corporate, Finance and Investment Funds Groups in the Cayman Islands practicing British Virgin Islands (“BVI”) and Cayman Islands law. We have invited him to provide some background to himself, his practice, and his insight on recent market developments and trends in the legal market.
Loeb Smith (“LS”): Robert, could you provide a brief overview of your current practice?
RF: I advise on corporate, finance and investment funds matters. If that sounds quite broad, it’s because it is. We have clients from across the globe who use offshore structures for many different reasons and so we have to be able to do what they require. I therefore advise on the launch of new private and mutual funds, on series financings, banking and finance matters as well as providing general corporate and commercial advice.
LS: Can you share more about your background?
RF: I trained and practice law for over 12 years in the UK. Throughout my time in the UK I was a banking and finance lawyer. I acted mainly for banks, building societies and other financial institutions on a variety of matters with particular focus on private equity finance and real estate investment and development finance. I took the decision to move to the Cayman Islands in 2021 when I joined Loeb Smith and have enjoyed broadening my practice area since then, whilst also having the opportunity to lean on my previous experience.
LS: Since joining the firm in 2021, you have been successful to date in your ability to earn the confidence of high-profile clients. What do you attribute that to?
RF: During my time in the UK, I undertook a secondment with a client, The Royal Bank of Scotland and so I know what it feels like to be the client and to be the recipient of legal services. It was an eye-opening experience as I was able to assess what the services we were providing felt like to the client. I’ve tried to maintain this perspective which has allowed me to anticipate client needs.
LS: From those which you can disclose, what do you think are the most challenging client matters that you have worked on?
RF: When I was a finance lawyer in the UK, the matters that always used to require a lot of planning were transactions which involved a bank making cross-collateralised facilities to a multi-national group.
There was one particular transaction where I was acting for HSBC where the borrower company had subsidiaries in, amongst other places, Sydney, Hong Kong and California. All subsidiaries were providing collateral for the loan but the different time zones made the delivery of the security (and associated legal opinions on the transaction documents) particularly difficult as all documents were required to complete simultaneously.
We therefore had to agree certain variations to the bank’s protocols around the dating of legal opinions and the date of pre-completion searches given the large time differences. Agreeing these variations whilst also dealing with lawyers in all jurisdictions and working to a very short timescale to completion, meant that I was in much need of some rest by the time it completed.
LS: What types of transactions have you recently been asked to advise on?
RF: As you would expect for a lawyer based in the Cayman Islands, we advise on plenty of investment funds. Despite the market turmoil last year, we continue to see a good number of investment funds launching with strategies based around Web3.0. Towards the end of last year, I advised on the successful launch of a private fund which was essentially a private equity fund but with particular focus on businesses that are developing Web3.0 infrastructure.
I also advised one of our large regional clients on its consignment arrangements with a newly established retail business with international brands in a new, prestigious location in Grand Cayman. I advised on the consignment terms (which included detailed retention of title and risk allocation provisions) and other terms on which other key services will be provided (such as HR and finance support, retail fixtures and fittings and management consultation).
I am currently advising a client who provides consultant and trading services in connection with the trading of cryptocurrencies and other digital assets for institutional investors. Our client provides these services through a Cayman Islands exempted company and we are currently advising the client on the restructuring of the way in which the business is capitalized with a mixture of debt and equity to maximize the commercial advantage of the business. I am currently advising on the establishment and registration of a crypto exchange and token marketplace with the Cayman Islands Monetary Authority.
LS: Lastly, are there any other developments and/or trends in the legal market that you see over the next 6 to 12 months?
RF: I expect a contraction in activity in the corporate finance markets given there are a number of economic conditions conspiring to make 2023 a difficult market to navigate. We entered 2023 with the conflict in Ukraine continuing to unsettle markets against a backdrop of increasing interest rates and uninspiring economic growth data in almost all major economies. The recent banking collapse of Silicon Valley Bank and the closure of Signature Bank in the U.S. and the issues affecting Credit Suisse all create a general concern about the banking system but the issues affecting these banks seem for now to be unrelated and do not point toward systemic weaknesses in the U.S. banking system or the wider international banking markets. Whilst there is no liquidity crisis like in 2008 / 2009 and so banks are able and willing to lend (particularly on higher margins), it is the demand for borrowing that I expect to weaken. This will also likely be coupled with more a more stringent approach to credit risk by financial institutions given the economic headwinds.
The issue of sustainability and Environmental, Social and Governance (ESG) credentials is also likely to continue to feature prominently. Indeed, it was noted last year that ESG considerations and sustainable investing is one of the fastest growing investment strategies in investment funds. As businesses are more often required to demonstrate their ESG credentials in tenders, bids and even through more rudimentary procurement exercises, so the market is also increasingly aware of the issue of ‘greenwashing’. I therefore expect legislatures and regulators to continue to consider these issues and even to introduce regulatory frameworks to ‘stress test’ ESG credentials that are stated in offering memoranda of new to market funds. Indeed, the Cayman Islands Monetary Authority is consulting on this very issue presently and it will be interesting to see what approach they take once the consultation period ends but I think the direction of travel is already pretty clear.
In terms of the corporate markets, I wouldn’t be surprised to see a significant uplift in private equity transactions due to (1) the sheer amount of private capital available, which I believe is near an all time high, and (2) the economic environment and international tensions which are making public offerings less attractive. Companies who are already listed may also look to sell-off non-core or underperforming business lines which might find a new home in private ownership.
LS: Thanks for your time, Robert.
For enquiries, please contact Robert using the following details:
E: [email protected]
T: +1 345 749 7499
A: Suite 329 | 10 Market Street | Camana Bay | Grand Cayman KY1-9006 | Cayman Islands