Faced with the collapse of mortgage lender Northern Rock plc in September 2007 and the unprecedented temporary nationalization of the bank five months later, Britain's Treasury called on "Magic Circle" law firm Slaughter and May to provide outside counsel on a host of legally thorny, politically sticky and financially complicated issues. Prominent Slaughter and May veterans Charles Randell and George Seligman led the effort. Another name emerged as well: Sarah Paterson, a finance and restructuring partner who has logged 16 years with the firm but has yet to turn 39.
"She was a very critical part of the team," says Seligman, who heads the firm's corporate restructuring and insolvency practice and has worked with Paterson since she was a trainee. Among other work, Paterson was responsible for structuring the financing of Northern Rock, Seligman says, and helped with financial ramifications of a government takeover. "She's an amazing lawyer."
As the global financial crisis spread, Treasury repeatedly turned to Slaughter and May for advice, including legislation that provided a framework for lending to distressed institutions. Paterson counseled on how to move deposits after the failure of Icelandic bank subsidiaries and helped Treasury decide on a course of action after bank Bradford & Bingley plc unraveled.
"It's been an incredible run and fascinating, unprecedentedly fascinating work," Paterson says by telephone from the London home she shares with her mathematician husband, Edmund, and daughter, Elizabeth.
"She is a natural," says Seligman. "She is extremely clever, has a superb intellectual record ... has a quick mind and gets to the heart of complex legal structures." Seligman adds that when Lehman Brothers Holdings Inc. failed, he was in Shanghai and Paterson handled the onslaught of client-related concerns. "She has enormous stamina," he says. Does she ever sleep? Paterson is asked. "No, no," she responds, laughing. "I live on Diet Coke. I'm renowned for it. After September 2007, increasingly large bottles of Diet Coke appeared on my desk."
It's all conditioning, she says. "In restructuring, often it is literally a matter of the company's survival. You get it done and you deliver the results. There's no choice [because] after that day, there's no more money. That's what makes this stuff terrifying and exciting all at the same time." She then relates: "I had a baby a few years ago [her daughter is now almost 4.] "Everyone said, 'Oh, you're going to be up all night. It's going to be awful. You have no idea what it's like.' Then when it [happened], I said, 'This is a bit of a walk in the park. I'm getting longer stretches of unbroken sleep than I ever get normally.' "
Since the Lehman bankruptcy, Paterson moved from advising Treasury to private-sector work. She was on the team that represented Countrywide plc, the U.K.'s largest real estate brokerage, which restructured in February. And there are other assignments, she says, none of which have been made public.
Paterson over the years has done a fair share of financing deals, which helps her restructuring work.
"It's really important as a restructuring lawyer to understand what's happening to the capital structures," she says. "You understand how they work. You understand what innovations were during the top of the market, so you understand roughly what you're expecting to see" when companies get into trouble.
Paterson came to Slaughter and May from Oxford University, where she did a bachelor's of jurisprudence, then completed a master's of law from University College London, going to school at night while working by day. She became partner in 2002 at the ripe young age of 32.
Slaughter and May's private-sector client base is second to none. But as Paterson reflects back on the past two years, she's quick to acknowledge the unique vantage point of her work with Treasury: coming up with precedent-setting solutions, establishing a legal framework, being part of a team that not only rescued companies but created legislation to help stabilize the system.
Northern Rock had the same goal as any restructuring: trying to sell a distressed company and, when that fails, figuring out what to do next. But, of course, this was no ordinary insolvency. "Normally you're worried about the financial stability of the company or possibly even a sector, but not the entire country."