Category: Bulgaria

Boyanov & Co., working with lead counsel Freshfields Bruckhaus Deringer, has advised initial purchasers Credit Suisse and Morgan Stanley on Bulgarian legal aspects of Standard Profil Automotive’s issuance of EUR 275 million 6.250% secured notes due 2026. Mayer Brown advised the issuer on the deal.

Standard Profil Group is a German producer of sealing profiles for automotive manufacturers, including brands of the BMW Group, Daimler, FCA, VW Group, Renault-Nissan, and Toyota, among others.

According to Boyanov & Co., the notes are guaranteed by the subsidiaries of the Standard Profil Group.

Boyanov & Co.’s team included Partner Damian Simeonov and Senior Associate Ralitsa Nedkova.

Mayer Brown’s team consisted, in the UK, of Partners Bernd Bohr, James Taylor, and Robert Flannigan, Senior Associate Asli Aksoylu, and Associate Whitney Joseph; in Germany, of Partners Martin Heuber, Volker Junge, Bernina Butt, and Andreas Lange, Counsels Jan Streer, Kirsten Schurmann, Malte Richter, and Susan Gunther, Senior Associates Tina Hoffmann, Hasine Azim, Armineh Gharibian, Ana Elisa Bruder, Marcel Horauf, and Stefanie Skoruppa, Staff Attorney Diego Noriega, and Associates Maximilian Kucking, Lisa Gesine Kirchner, and Max Birk; and in the United States, Partner Jared Goldberger and Associate David Goett and Joseph Lifsics.

Unsurprisingly, 2020 saw a reduction in the A-listers on the Bulgarian real estate market, including investors in office, retail, and hospitality properties. The lockdown sent IT companies, which had been dictating the local office space market, into home office. The future of commercial and entertainment properties like shopping malls, cinemas, concert venues, and sports arenas remains uncertain – but tourism remains the hardest hit.

After a year of arrested development, a few trends have taken form in the Bulgarian real estate market that we believe will probably continue in 2021.

Second Homes to Replace City Residences and Offices

The imposition of restrictions on free movement and the “forced” home office increased the demand for suburban properties, while at the same time significantly decreasing the interest in new office buildings. Most employees with families who had to spend a lot of time working from home had to adapt to the extraordinary circumstances. Thus, the most desirable combination is a detached house with two or three bedrooms and a yard within a radius of 30-60 kilometres of the big cities.

Many homeowners are also choosing to upgrade their second home to a permanent one, assessing as positive the tranquillity and closeness to nature that their holiday properties provide. The outflow from the central urban areas and areas with densely built residential buildings led to an increase in the prices of so-called “weekend properties,” and the relocation of some businesses to the suburbs (for example, there is an increased interest in warehouses for courier companies or e-commerce businesses).

So far there has been no increase in the availability of residential properties in the central urban areas or a decrease in their price, but if the trend continues, such consequences are reasonable assumptions.

The office market, however, took a big hit. The pandemic lead to a severe decrease in office rent as well as showing to investors that the trend of open space office areas probably is at an end.

Decreased Value of Retail Properties

Due to the anti-epidemic measures imposed by the Bulgarian government, indoor shop-ping centers were partially closed. Only a few of their tenants – primarily pharmacies, grocery stores, pet food stores, customer centers of mobile operators, and banks – were allowed to stay open. The owners of shopping centres are trying their best to keep ten-ants who are not allowed to operate.

Our expectation is that if there is no change in the measures imposed by the government, the price of retail space in shopping centers is likely to decrease, as shops there will be seen as less attractive than the “on street shops,” which are not affected by the measures. Nevertheless, at this stage it is difficult to predict how the market will react in this particular area since the government constantly tries to “soften” the restrictive measures and allow the operation of the malls.

Hospitality Business Reformed

Restaurants remain closed, with most of their kitchens working by delivering food to customers. If the situation continues as it is, many restaurants with large seating areas will be forced to relocate.

As for the hotels, an interesting trend is that most of them are offering post-Covid retreat programs, including special menus and consultations with nutritionists and physiotherapists, in addition to the usual spa and wellness procedures. Given the development of the pandemic and the vaccination process, our expectation is that many hotels located in spa resorts will add programs to their portfolios to deal with the effects of COVID-19 and will likely evolve in modern sanatoriums.

New Expectations

Location remains a major driving force in real estate demand, although which locations are preferable appears to be changing. Buyers are now demanding a stable Internet connection as a first priority, even in locations where the requirement was considered unusual 12 months ago, such as mountain huts and coastal villas. The other trend that is emerging is the requirement that the property/building share ecological value (such as small smart green buildings, constructed with locally obtained or recycled materials, minimizing the environmental footprint).

By Elena Todorova, Attorney, and Dimitar Vlaevsky, Attorney, Schoenherr

This Article was originally published in Issue 8.2 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Wolf Theiss, working with Gide Loyrette Nouel as to French law and Norton Rose Fulbright as to German law, has advised the EBRD, the Black Sea Trade and Development Bank, the International Finance Corporation, UniCredit S.p.a., UniCredit Bulbank, UniCredit Bank AG, Societe Generale, Kommunalkredit Austria, and DSK Bank on their provision of a EUR 296 million debt package to support the SOF Connect consortium on its successful bid for the concession of the Sofia Airport. Willkie Farr & Gallagher, Kinstellar, and Bouzeva & Partners advised the borrowers on the deal.

According to Wilkie Farr & Gallagher, the European Investment Bank was also set to join the pool of lenders shortly after handover of the Sofia airport, which occurred on the April 19, 2021 financial close.

SOF Connect was formed and led by Meridiam and includes Strabag, and is supported by Munich Airport. It was awarded the concession of the Sofia Airport in 2020.  According to Wilkie, the finance documents were entered into on December 24, 2020, with financial close occurring on April 19, 2021. According to the firm, “in addition to an upfront fee of EUR 337 million, the concessionaire commits to provide EUR 624 million in investments over the concession period, including the construction of a third terminal by 2030. The concessionaire will also start paying annual concession fees starting on the 11th year of the concession period following the Bulgarian government’s decision, as approved by the European Commission’s, of the deferment of the payment of the annual concession fees of the ten years to the last ten years due to the consequences on the traffic of the ongoing COVID-19 pandemic.”

Wolf Theiss’s team was led by Vienna-based Partner Marcell Nemeth and Sofia-based Partner Katerina Kraeva and included Vienna-based Partners Claus Schneider and Leopold Hoeher, Sofia-based Partner Anna Rizova, Vienna-based Counsel Zeno Grabmayr, Sofia-based Counsel Oleg Temnikov, Budapest-based Counsel Melinda Pelikan, and Sofia-based Associates Konstantin Altandzhiyski and Ivan Ivanov.

Willkie Farr & Gallagher’s team was led by Paris-based Partner Amir Jahanguiri and included Partners Jasmin Dettmar, Alessandro Turina, Thierry Laloum, and Faustine Viala.

Kinstellar’s team on the project financing was led by Counsel Svilen Issaev, supported by Associate Denitsa Kuzeva. Counsel Mladen Minev and Sofia Managing Partner Diana Dimova have been co-ordinating the wider Kinstellar team advising Meridiam and SOF Connect throughout the various stages of the process (as reported by CEE Legal Matters on June 15, 2020).

Bouzeva & Partners’ team was led by Senior Partner Tania Bouzeva and included Partners Angel Angelov, Evelina Angelova, Tenio Tenev, and Nikolay Daskalov, Senior Associate Alexandra Georgieva, and Associates Kiril Kirilov, Rumyana Ivanova, Slavomir Buyukliev and Damyan Pilkov.

According to Kameliya Naydenova, Legal Counsel South Central Europe at Mondelez International in Bulgaria, the market has somewhat recovered from the blast wave of the COVID-19 crisis. Yet, many industries still need to overcome the change in demand and consumer habits, as well as certain difficulties brought on by the pandemic.

“Even though the food industry was less affected by COVID-19 than other industries, the ‘new normal’ brought certain changes regarding the categories of products people buy,” Naydenova says and explains that not only the people’s purchasing power but also their habits have been affected by COVID -19 measures, lockdowns, and social restrictions. “For example, people used to grab a snack on the go on their way to work,” she says and notes that, since most people are working from home, their habits followed the newfangled sedentary lifestyle. Despite these trends and their effect on the volume of sales of certain goods, Naydenova describes the Bulgarian food market currently as relatively stable and predictable.

Related to the purely legal sphere, Naydenova reports that the implementation of the EU Unfair Trading Practices Directive, which was adopted in April 2019, is one of the core topics for the food and retail industry. The directive contains rules that ban certain unfair trading practices imposed unilaterally by one trading partner on another. The rules are aimed to improve the position of businesses and farmers in the food supply chain. The true effects of the directive remain to be seen as some markets have implemented the directive just recently.

Naydenova also points to certain technological and regulatory hurdles which have persisted into 2021. “We still need to sort out the regulation regarding working from home, such as labor incidents, privacy, home network security of the network, as well as efficient means of communication,” she says.

As to what the future holds, Naydenova believes that optimism isn’t unwarranted. “Even though the crisis isn’t behind us, people believe that in 2021 vaccination will bring back some sense of normalcy.” Nevertheless, Naydenova treads carefully as she is aware that people are still under a lot of pressure. “There is an abundance of work ahead of us and I try to keep a positive mood, sense of belonging, and team spirit,” she says. According to her, the South Central European team is built on trust, cooperation, and open communication.  “Build a team so strong you don’t know who the boss is,” she adds.

In order to maintain the morale of her team of three, she has taken, as she describes it, a people-centric approach. “My belief is that the profits and business results will come when the people feel appreciated,” she says. To that end, she makes sure her team’s efforts do not go unrecognized and she explains she tries to make their every success visible and rewarded. Furthermore, she believes that people need to properly disconnect from their job and to keep the “work-life” balance, so the practice of having “short summer Fridays,” when her colleagues may go offline earlier, will continue in the future.

Originally reported by CEE In-House Matters.

Boyanov & Co., working alongside Faegre Drinker Biddle & Reath, has advised the Concord USA owners on Bulgarian aspects of the sale of company to H.I.G. Capital.  McDermott Will & Emery and Wolf Theiss, provided U.S. and Bulgarian advice, respectively, to H.I.G. Capital.

Concord USA is an IT consultancy company providing various IT services in different sectors, including healthcare, life sciences, retail, financial services, and manufacturing. It was established in Minnesota in 2003.

Boyanov & Co.’s team was led by Partner Nikolay Kolev and included Senior Associate Ivaylo Angelov and Associate Dimitar Mihaylov.

The Faegre Drinker team consisted of Partner Jonathan Nygren and Associate Andrea Schede.

Wolf Theiss’ team in Bulgaria was led by Partner Katerina Kraeva and included Counsel Hristina Dzhevlekova and Senior Associate Jasmina Uzova.

Kambourov & Partners, Latham & Watkins, Shearman & Sterling, NautaDutilh, Noerr, and Bar & Karrer advised private equity firm Silverfleet Capital on its acquisition of a majority stake in the entity resulting from the recent merger of Bulgarian software company Bulpros and German CRM company ec4u. Financing was provided by Ares, which was represented by Ashurst.

Bulpros, which was founded in 2010, is a digital transformation company whose offerings include enablement of digital solutions, cybersecurity solutions, cloud migration, and managed services, as well as technology services.  

Founded in 2000, ec4u specializes in CRM and other consulting services, aimed at the digital transformation of processes in marketing, sales, service, and e-commerce. 

Bulpros and ec4u have been collaborating since 2018 as partners in the field of digital cloud solutions. The company founders and existing management teams of both companies will remain as large shareholders and continue to operate the merged company. The combined platform has more than 1,400 employees across 25 offices in 11 countries.

Kambourov & Partners’ team included Partners Veronika Hadjieva and Ivo Alexandrov and Senior Associates Todor Vlaykov, Yana Todorova, and Mario Arabistanov.

Shearman & Sterling’s Munich-based team included Partner Winfried Carli and Associate Andreas Breu.

Ashurst’s Frankfurt-based team advising Ares was led by Partner Anne Grewlich and included Partner Gerrit Clasen, Counsels Gabrielle Metherall and Martina Rothe, Senior Associate Christian Sotta, Associate Emilie Veyran-Muller, and Senior Transaction Lawyer Julia Donnecker.

In general, a medicinal product can be placed on the Bulgarian market after obtaining a marketing authorisation / certificate for registration issued under the Bulgarian Medicinal Products in Human Medicine Act or after completing the “centralised procedure” under Regulation (EC) No 726/2004 of the European Parliament and of the Council of 31 March 2004 laying down Community procedures for the authorisation and supervision of medicinal products for human and veterinary use and establishing a European Medicines Agency (“Regulation 726/2004“).

The “centralised procedure” allows the marketing authorisation holder to receive one single marketing authorisation and, based on that, to market the authorised medicinal product throughout the EU. The centralised procedure is mandatory for orphan medicinal products (medicines for rare diseases) and for products derived from biotechnology (e.g. biological medicinal products such as vaccines, stem cells and tissue engineering products, etc.).

According to Article 82(1) of Regulation 726/2004, the applicant may be granted only one (unique) authorisation. However, the second subparagraph of Article 82(1) provides for an exception: the Commission may agree to the submission of a further application for the same medicinal product (“duplicate marketing authorisation”) “….when there are objective verifiable reasons relating to public health regarding the availability of medicinal products to healthcare professionals and/or patients…”.

Usually to increase the availability of their products, the authorisation holders use the above-mentioned exception to obtain (at reduced cost) a duplicate authorisation for the first generic of the already authorised chemical medicinal products.

The European Medicines Agency (EMA) is the competent authority to assess whether the conditions for issuance of a duplicate authorisation have been met. To ensure the transparency and predictability of the EMA’s assessment, the Commission published in 2010 the Notice on Handling of Duplicate Marketing Authorisation Applications of Pharmaceutical Products under Article 82(1) of Regulation (EC) No 726/2004 (the “Notice“). It was updated in 2011 and again in March 2021.

What’s new?

a) Product’s availability in focus

According to the most recent amendments to the Notice, “there is no automatic link between the introduction of a duplicate marketing authorisation by the holder of the original medicinal product (be it a chemical or a biological medicinal product) and the increased availability.” Therefore, Annex 1 to the Notice is amended to stress that the duplicate marketing authorisation requested because of public health reasons is a procedure for which the applicant should provide specific evidence with regards to the product in question. The evidence (e.g. list of the EU Member States where the “first” medicinal product is actually marketed and where the duplicate will be made available) must allow the Commission to verify the positive effect of the duplicate on the product’s availability. Any claim about the increase of a product’s availability should be assessed on a case-by-case basis by examining the justification and evidence provided.

b) Orphan medicinal products and paediatric use marketing authorisations

Section 2.1 of the Notice sets out a list of practical cases that fall outside the scope of Article 82(1). The list is now extended and includes cases where a separate marketing authorisation application is required by (a special) law. In such cases, the applicants do not have to submit a request for a duplicate under Article 82(1).

Considering the list in Section 2.1, this would be the case with (i) applications submitted under Article 7(3) of Regulation (EC) No 141/2000 (according to which an orphan and non-orphan indication cannot be covered by the same marketing authorisation), and (ii) applications submitted under Article 30 of Regulation (EC) No 1901/2006 – paediatric use marketing authorisations.
While the Notice is not legally binding, the amendments to Section 2.1 are in line with (i) the concept of the orphan exclusivity protection / supplementary protection for paediatric use marketing authorisations, and (ii) applicable case law.

c) Biosimilars

The 2011 version of the Notice did not include specific considerations with regard to biological products and/or biosimilar medicines. The latest amendments of the Notice were initiated predominantly because the Commission detected potential local market issues (including competitive disadvantages) related to granting duplicates for biological medicines, since when it comes to biosimilars, the “impossibility to characterise biosimilars as ‘generics’ has repercussions on a series of factors that influence market access”.

Applicants requesting a duplicate marketing authorisation can initiate pre-submission activities with the EMA prior to having the Commission’s agreement as required under Article 82(1). They must also complete the template provided in Section II of the Annex to the Notice and submit it along with the request letter. The template should be used for all applications submitted from 1 April 2021 onwards.

By Elena Todorova, Attorney at Law, Schoenherr

CMS has advised Vier Gas Transport GmbH on its successful participation in a tender for a commercial dispatching center technical consultant for the Interconnection Greece-Bulgaria project and enhancement of the IGB network code. 

The German holding company Vier Gas Transport was awarded the contract pursuant to the March 10, 2021 decision of the contracting authority, ICGB AD.

CMS’s team was led by Managing Partner Kostadin Sirleshtov and included Associates Borislava Pokrass and Diyan Georgiev. 

Djingov, Gouginski, Kyutchukov & Velichkov has advised the founders of tech start-up MYX AD on EUR 350,000 invested into the company by a group led by New Vision 3 Fund KD.

MYX works mainly in the telecom sector, generating and analyzing digital representations of telecommunications cell towers and other infrastructure. The company combines data from a variety of sources – satellites, piloted aircraft, drones, and mobile phones – to create 3D virtual copies of the real world that can then be analyzed with AI algorithms, to yield information such as signal propagation, angle of antennas, tracking of broken parts, rust monitoring, and others. 

According to DGKV, ”the investment amount came from a mixed group of co-investors, of which New Vision 3 Fund KD was the lead partner, utilizing funding from the Fund of Funds.” According to the firm, “MYX received debt financing convertible into equity for the development of the company’s business. In this way the investors acquire direct corporate control rights, in their capacity as bondholders, and thereafter the conversion of the bonds into equity happens almost automatically and cost-free.”

DGKV’s team was led by Partner Stephan Kyutchukov and included Associate Peter Angov.

Amendments to the Competition Protection Act (“CPA“) came into force on 26 February 2021. On paper, the changes look good and are another step towards competition rules that are aligned with European regulations. In particular:

The SIEC test is formally introduced as part of the merger control proceedings: The former CPA provided a dominance test for transactions (i.e. a transaction can be prohibited if it strengthens or creates a dominant position in the market). The significant impediment of effective competition (SIEC) test was not formally recognised under the former CPA. In practice, however, the Commission for the Protection of Competition (“CPC“) applied the test, so the amendment is more of a formality.

Clearer timeline for the Phase 2 proceeding: The Phase 2 proceeding is now 90 (+40) business days (instead of four months (+40) business days). The amendment again looks merely like a formality, but we expect it will lead to a shortened Phase 2, since the expiry of the four-month period is more open to interpretation.         

New rules on unfair trading practices in relationships in the agricultural and food supply chain: Directive (EU) 2019/633 of the European Parliament and of the Council of 17 April 2019 on unfair trading practices in business-to-business relationships in the agricultural and food supply chain is implemented in the new CPA.

Repeal of the institute of abuse of stronger bargaining power

The new CPC repeals the institute of stronger bargaining power. This legal instrument (largely unknown in other EU Member States) was introduced in 2015 and was criticised by practitioners for its wide scope of application. Until the repeal, the CPC was responsible for interpreting it, which created uncertainty about how larger companies should deal with their smaller partners without breaching the provision.

Dawn raids in private residences and personal vehicles of manages and employees: CPC commissioners are now entitled to search not only the business premises of potential infringers but also private residences and vehicles to obtain evidence of possible competition law violations.

Clearer terms in antitrust proceedings: Previously, after the oral hearing in antitrust proceedings, the CPC had to decide on the case in a closed hearing. However, the CPA was silent as to the term when such a decision should take place. Some proceedings therefore may take more than a year after the oral hearing to be finally resolved with a decision. The new CPA provides for a term of up to six months after the oral hearing when the antitrust case must be resolved.

The amendments are not surprising and follow the trend in Bulgarian competition law to be better aligned with European regulations. For example, pre-notification meetings were introduced in early 2021, and last year short- and long-form merger filings were introduced. Nevertheless, despite the various positive changes in the legislation, we have yet to see substantial improvement in the practice of the CPC. Antitrust and merger proceedings remain comparatively slow and sufficient case law is missing in many important areas (conditional merger approvals, sanctioning of cartels, breaches related to vertical agreements, leniency, etc.). It is to be hoped that the many positive changes in the statutory provisions introduced recently will be followed by improved merger control and antitrust proceedings and not just a blank implementation.

By Galina Petkova, Attorney at Law, Schoenherr