Kambourov & Partners has advised DEV.bg, a Bulgarian IT community developer, on the EUR 200 thousand acquisition of newly issued shares representing a 10% stake in the company by hosting and software development company SiteGround.
Kambourov & Partners’ team included Partner Mitko Karushkov and Senior Associate Mario Arabistanov.
Tsvetkova Bebov Komarevski has advised Eleven Capital on its IPO – the first in Bulgaria since 2018. The Karoll investment firm placed the IPO.
According to a TBK statement, “despite the current Covid-19 pandemic and the persistent pressure on financial markets across the world during recent weeks, the IPO was successfully placed among ninety institutional and retail investors, evidencing the strong demand of the investor base for the opportunities related to the venture capital business.”
TBK advised Eleven Capital throughout the process, including the prospectus preparation phase, the prospectus approval procedure before the Bulgarian Financial Supervision Commission, and the IPO subscription period.
As a result of the IPO, Eleven Capital will be the first venture capital firm listed on the Bulgarian Stock Exchange.
The TBK team was led by Managing Associate Damyan Leshev, assisted by Associate Petar Ivanov. Managing Partner Nikolay Bebov directed the team.
D’Ornano Partners has advised the Groupama Group on its acquisition of Express Life Bulgaria IJSC, a member of the OTP Group. Schoenherr advised the OTP Group on the deal.
Express Life Bulgaria IJSC was founded by Societe Generale and was acquired by the Hungarian OTP Group in January 2019.
D’Ornano Partners’ team was led by Managing Partner Francois d’Ornano and included Managing Associate Ana-Maria Veres.
Schoenherr’s team included Bulgarian Partners Ilko Stoyanov and Gergely Szaloki and Associates Milena Gabrovska and Katerina Kaloyanova.
Kambourov & Partners has advised DS Smith on Bulgarian aspects of the sale of it plastic packaging business to Liquibox. Wolf Theiss reportedly advised Liquidbox on the deal.
The acquired division includes both the rigid and flexible packaging businesses.
Kamburov & Parnters’s team consisted of Partner Veronika Hadjieva.
Kinstellar has advised the EBRD on its first loan under the EUR 200 million Bulgarian Water Sector Financing Framework to Ruse Water Supply and Sanitation Company.
The framework was established with the bank’s own funds and contributions from the state-owned Fund Manager of Financial Instruments in Bulgaria from the EU’s European Structural and Investment Funds.
According to Kinstellar, “the EUR 8.7 million financing for Ruse Water Supply and Sanitation Company will improve water and wastewater infrastructure for 220,000 residents in the Ruse region in northeast Bulgaria. It will rehabilitate 63 km of water supply pipelines and 40 km of wastewater collection infrastructure and will help the water operator cut water losses, increase effectiveness and strengthen financial performance.”
Kinstellar’s team included Counsel Svilen Issaev, Managing Associate Mladen Minev, Senior Associate Kristina Lyubenova, and Associate Denitsa Kuzeva.
“The third year a Government is in power is when it usually feels the most confident to work on reforms,” says Kostadin Sirleshtov, Managing Partner at CMS in Sofia.” At the moment the Bulgarian Government is stable and active in various sectors, considering the very small possibility of a new election this year.”
Sirleshtov feels like this is the most fruitful period for Bulgaria in several years, as “the EUR 2 billion Turkish stream extension project is underway, as are the final stages of Sofia and Plovdiv airports.” The biggest focus, he says, is on the country’s infrastructure and automotive sectors. “Bulgaria was on the final shortlist for the new Volkswagen factory, the New Green Deal of the EU is driving new opportunities on the market, and even unfortunate events such as the water-supply crisis in Plovdiv have pushed new investment,” he explains.
Turning to the subject of legislative developments, Sirleshtov reports that “there is a big focus on the Rule of Law, prevention of corruption, and anti-money laundering,” and he adds that “new legislation is being adopted as we speak. Changes have also been introduced in the banking sector, mostly considering the consolidation of banks.” He reports that newly-appointed General Prosecutor, Ivan Geshev, has “promised to work on reforms and the implementation of rule of law.”
Sirleshtov is satisfied with the Bulgarian economy, explaining that “the most positive thing is that the Bulgarian Lev has been pegged to the Euro for several years now, which means that every investment is hedged to the Euro, making investors happy.” He adds that the effects of this are already visible, as the country’s real estate and M&A sectors are booming. “The banking sector has seen some large deals, including, most notably, Societe General bank’s acquisition by OTP. Local banks are overly liquid and hence invest a lot.”
According to Sirleshtov, some sectors that were previously less active are expanding as well, including the military and the rail industry, which he says has “attracted some important international players.” While investment is rising, he reports some problems with exits. According to him, “the protection of competition has led some market players to have trouble selling their businesses. This, I think, is a much bigger concern than investment, which is currently on the rise.”
“In our jurisdiction, stability disappears rapidly,” concedes Sirleshtov. “What Bulgaria needs is a stable Government ready to work on reforms. If we wish to join the Eurozone in the next couple of years, we need all actors to understand their jobs and work hard to reach this goal.” Although most remain positive in light of positive trends in various fields and the expectation of even more financing on the market in the future, he cautions that things could come crashing down by “a catastrophic event, such as the shocking 2014 crash of CorpBank.” As a result, he says, “in conclusion, we just hope to continue with the current stability in order for things to work out in Bulgaria.”
The automobile part-and-component-production sector’s expansion in recent years has become a motor of the Bulgarian industry and economy. Since the Japanese company Yazaki’s investment some 15 years ago, and following Bulgaria’s EU accession in 2007 – and thanks to the common European market and the globalization of car production – Bulgarian car part manufacturers have successfully integrated into European and international supply chains as suppliers and subcontractors for global brands such as BMW, Mercedes, Renault, Nissan, Audi, Ford, Porsche, and Tesla. Nowadays, 80% of all cars have parts produced in Bulgaria. In some specific segments, Bulgarian manufacturers have become absolute market leaders – for example, 90% of the airbag sensors in all European cars are produced in Bulgaria.
For several months the decision of Skoda/Volkswagen, which put Bulgaria on the short list for its future plant for several of its brands, has been expected. If the investment happens in Bulgaria, this would be the first large-scale investment in the production of finished cars, and, at more than EUR 1.5 billion, it would be on a completely different scale than previous investments. The Bulgarian government is also currently in discussion with leading electric car and battery manufacturers from South Korea, the UK, and France regarding potential investment in a high-tech factory in the country.
Following the rapid development of the automotive sector in Bulgaria, the leading car dealership in Bulgaria, Moto Phohe (which sells Fords, Volvos, and Range Rovers), was successfully acquired by Japan’s Sumitomo Corporation holding company.
Boom in Logistics and Transportation
The Bulgarian government has put deliberate effort into boosting the logistics and transportation sector in Bulgaria by attracting leading international players.
The Plovdiv airport concession was awarded to China’s HNA, and in 2019 the concession of the Sofia airport – the largest PPP in Bulgarian history – was made available, with a number of foreign investors – including GMR from India – participating in the highly-contested tender. It is expected to complete in 2020 and to bring investments in excess of EUR 1 billion and a new terminal. This success follows a significant increase in the number of passengers flying to and from Bulgaria’s key transportation hubs: Sofia, Varna, and Burgas (with airports operated successfully for ten years by Fraport).
The underdeveloped railway sector in Bulgaria has had a renaissance over the last few years, with major parts of the rail infrastructure projects awarded to leading international companies. China Communications Construction Company, Ltd. (one of the largest construction companies in the world) won the tender for the construction of Elin Pelin-Kostenets high-speed railway in Bulgaria, marking a major milestone for the sector. The construction of this section of the Bulgarian railway system is expected to start in 2020 and to finish by 2022.
Transportation of natural gas was the real highlight of 2019 for Bulgaria with both the interconnector between Greece and Bulgaria and the extension of the TurkStream pipeline bringing in over EUR 2 billion in investments. With suppliers such as Corinth Pipeworks S.A. (Greece), Completions Development Sàrl (Luxembourg), and many others, these projects will develop over coming months and will contribute to the diversity of the supply.
Despite the fact that the road construction sector in Bulgaria continues to be dominated by local contractors, some of which are state-owned, several projects are ongoing, with the extension of the Struma and Hemus Highways being the most notable. The Toll System project, which has been delayed for quite some time upon its development by an Austrian company, is expected to be put in operation in 2020, thus boosting the income from trucks and other vehicles passing through Bulgaria.
New Opportunities
Construction of the Shipka and Petrohan tunnels constitute major challenges for the Bulgarian civil construction and transportation sector, which lacks the necessary capability, and most likely some major foreign players will participate in these upcoming tenders.
Sofia’s hosting of the recent 16+1 Summit of countries from Eastern Europe and China and Bulgaria’s active participation in the One Belt One Road initiative provide further opportunities for investments into the automotive, logistics, and transportation sectors of the country.
By Kostadin Sirleshtov, Managing Partner, CMS Sofia
This Article was originally published in Issue 6.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
Bulgaria is well-known for its roses, more precisely its oilseed roses (маслодайни рози). Oilseed roses are famously used to produce rose oil, which is one of the most expensive oils, commonly referred to as “liquid gold”. Rose oil is used in the perfume industry, but the Bulgarian oilseed rose also has many other applications. The petals are used in jams, jellies, sweets and liqueurs. Products derived from processing the blossoms are used in cooking as flavouring, flavour enhancers and colouring agents. In addition to the oil, processing the oilseed rose blossom also produces rose water, which is used both in the perfumery and food industries.
On 31 January 2020, the new Law on the Oilseed Rose (Закон за маслодайната роза) (the “Law“) was promulgated in the State Gazette and simultaneously entered into force. Its purpose is to protect the oilseed rose, traditionally grown in the territory of Bulgaria.
Scope of the Law
The Law regulates inter alia (i) the identification of oilseed rose plantations and cultivation of the oilseed rose, (ii) the purchase of the oilseed rose blossom, and (iii) the production and labelling of oilseed rose products. A crucial amendment is the establishment and maintenance of a national electronic register of rose producers, rose processors, oilseed rose blossom production sites and oilseed rose plantations (the “Register”). The Register is kept by the Ministry of Agriculture, Food and Forests and is public.
Cultivation and identification
The Law also contains oilseed rose cultivation standards and requirements to facilitate the identification of oilseed rose plantations by the authorities. Oilseed rose producers are now obliged to report newly created and/or destroyed oilseed rose plantations annually.
Purchasing
The Law strictly regulates how and where oilseed rose purchases may be conducted. The oilseed rose may be purchased only based on a written agreement concluded between rose producers and rose processors registered in the Register, the minimum content of which is prescribed by law. In addition, the Law exhaustively lists the places where purchases may be made.
Production and labelling
The Law also clarifies production and labelling requirements for oilseed rose products as well as requirements for production sites. Rose producers and processors are also faced with various reporting obligations.
Control, fines
Among others, the following are subject to control under the Law: (i) creation and destruction of oilseed rose plantations; (ii) production of oilseed rose products for food; and (iii) production sites, distilleries and other processing facilities. The means of control, as well as the rights and obligations of the controlling authorities are specified in the Law.
The Law foresees various fines for non-compliance, ranging from BGN 500 to 10,000 (approx. EUR 250 to 5,000).
Interestingly
Bulgaria is also a world leader in the production and export of lavender oil.
By Gergana Roussinova, Associate, and Elena Todorova, Attorney at Law, Schoenherr
Georgiev, Todorov & Co has successfully defended the rights of Multi-Profile hospital for Active Treatment Europe against the Ministry of Health of Bulgaria.
Georgiev, Todorov & Co reports that it “filed an appeal against an order of the Minister of Health, which had revoked Multi-profile Hospital for Active Treatment Europe’s authorization to carry out medical activity.”
According to Georgiev, Todorov & Co., the Supreme Administrative Court’s February 2, 2020 decision voided the ruling of the court of first instance. According to the firm, “according to the court, termination of the activity would be disproportionate to the purpose by which the law empowers the Мinistry of Health to order a revocation of a permit for medical activity.”
The Georgiev Todorov & Co team was led by Lawyer Mariya Derelieva.
Under Bulgarian anti-money laundering law, all obliged entities must adapt their internal rules in accordance with Article 101 of the Bulgarian Anti-Money Laundering Act (“AMLA“) within six months following the publication of a national assessment of the risks related to money laundering and terrorism financing (“National Risk Assessment“) on the website of the State Agency for National Security (“SANS“).
The National Risk Assessment was published on 9 January 2020, triggering the start of the six-month deadline.
Who is concerned?
What to do?
What is the deadline?
What are the fines for non-compliance?
What else?
This is a general communication to alert you to the approaching deadline to adapt your internal rules. The Schoenherr Sofia team remains available to support you and respond to your questions in this regard.
By Milena Gabrovska, Associate, Schoenherr