Category: Bulgaria

Georgiev, Todorov & Co has successfully defended the interests of Multi-profile Hospital for Active Treatment Doverie against Bulgaria’s National Health Insurance Fund in a dispute involving payment for medical care provided by the hospital to health-insured persons above the limits set by the NHIF.

According to Georgiev, Todorov & Co, “the Sofia City Court ordered the NHIF to pay MHAT Doverie the due remuneration for medical care provided on clinical paths over the monetary limit set in the agreement by the NHIF for 2017, along with the statutory interest until the final payment of the amount. The court’s decisive reasoning centers on the constitutional provisions according to which the formation and implementation of the health policy is an obligation of the state. According to the court, proper internal budget planning is an obligation of the defendant NHIF as a compulsory health insurance authority. A deviation from the planned uniform spending of the budget does not limit NHIF`s obligation to pay the providers of hospital care services for all actually performed and reported medical care to health-insured persons. The hospital owes provision of medical care to all health-insured persons, who have requested it. Therefore, the contract between the hospital and the NHIF cannot be interpreted that if the hospital performed medical activity above the set monthly limits, it should be at its own expense. The medical services provided above the limits set by the NHIF, which the hospital was obliged to carry out, are subject to payment.”

The Georgiev, Todorov & Co team was led by Lawyer Mariya Derelieva.

DGKV has successfully defended the interests of Mayoral Moda Infantil S.A. and its Bulgarian subsidiary Mayoral Bulgaria EOOD before the Bulgarian Commission for Protection of Competition in a case brought by their commercial partner, Comsed, involving allegations of superior bargaining position.

Mayoral Moda Infantil is a Spanish manufacturer of children’s clothes and accessories. 

DGKV’s team included Partner Nikolai Gouginski and Senior Associates Dessislava Iordanova and Anton Petrov.

Tokushev & Partners has helped the Fund of Funds in Bulgaria make arrangements with two financial intermediaries to create several alternative investment funds for equity investments.

In the first, Tokushev & Partners advised the FMFIB with regard to Innovation Accelerator Bulgaria, “as a result of which,” the firm reports, “was created another alternative investment fund for acceleration and initial financing with funds from Operational Programme ‘Innovations and Competitiveness’ 2014-2020 (OPIC). The established AIF as a limited partnership with shares capital is a precedent within the work of FMFIB and regardless of the challenges faced, the team led by Viktor Tokushev was once again successful. The established AIF will perform investments in start-ups with a total of BGN 30.5 million, of which BGN 27.4 million is public funds and the rest will be acquired through private investors. The plan is to have over 200 different enterprises financed with investments in the acceleration phase being up to BGN 100,000 and in the initial phase they may reach up to BGN 2 million.”

In the second matter, the firm helped the FMFIB, working with financial intermediary Morningside Hill Capital Management, to create the third alternative investment fund for equity investments, financed through public funds from OPIC and capital from private investors. According to Tokushev & Partners, “thus, the team led by Viktor Tokushev has built on its successful work on the financial instruments of the Fund of Funds in Bulgaria (FMFIB). Within the chosen legal form of a limited partnership, the AIF will dispose of a resource of BGN 28.6 million …. The amount of the provided funds to different companies is expected to be in the range of BGN 750,000 to BGN 3.5 million. The fund manager is planing to complete between 15 and 20 projects [before] the end of the program period … in December 2023.”

CMS has advised UniCredit Bulbank on the sale of a mixed non-performing loan portfolio, secured mostly by real estate assets, to a consortium of APS Holding and Balbec.

According to CMS, “the transaction, with a claim value of over EUR 50 million, consisted of a multi-phased sale bidding process organized among international and Bulgarian institutional players on the NPL market, including private equity firms, specialized investment vehicles, and loan management firms.”

The CMS team included of Partner Gentscho Pavlov and Associates Ivan Gergov and Desislava Anastasova.

Boyanov & Co has advised Globalfoundries on its acquisition of the Process Design Kit‘s engineering team from Smartcom Bulgaria AD in Sofia. CMS Sofia advised the sellers.

According to Boyanov & Co, “the Process Design Kits are the critical interface between a company’s integrated circuit design and the semiconductor fabrication plants, which manufacture the clients’ chip products. Since 2015, Smartcom has supported GF’s PDK development and quality assurance for platform technologies spanning from 350nm to 12nm.” According to the firm, “under the terms of the acquisition, GF has acquired Smartcom’s PDK development team of more than 125 employees.”

The Boyanov & Co team included Partner Yordan Naydenov and Senior Associates Borislav Notovsky and Violeta Kirova.

The CMS team included Partner Dimitar Zwiatkow and Associates Ivan Gergov and Marin Safarov.

Kambourov & Partners has advised Akropolis Real Estate BV on the sale of a 197,000 square meter residential development lot in Sofia to the Galaxy Investment Group.

Galaxy was not represented by external counsel on the deal, and financial details were not provided.

Kambourov & Partners’ team was led by Partner Atanas Shopov.

Vassilev & Partners has helped Cyprus’s JFD Group Limited register its branch in the Bulgarian Commercial Register and the Investment Intermediary Register kept by the Financial Supervision Commission.

JFD Group Limited operates in Austria, Cyprus, France, Germany, Switzerland, United Kingdom, Czech Republic, Netherlands, Spain, Portugal, Brazil, and Italy.

The Vassilev & Partners team consisted of Partner Konstantin Vassilev and Paralegal Aleksandar Dzhurov.

In 2013, a wide range of changes were introduced in relation to the London Inter-Bank Offered Rate. A staple for a wide range of financial products, LIBOR has been the dominant rate for syndicated loans, bonds, and derivatives entered into on the Bulgarian, CEE, and wider European markets. However, following a series of problems over the past decade, the need to move away from LIBOR has become apparent. As panel banks would not be required to submit their references by the end of 2021, the question has become what the alternatives to LIBOR are and how they can be implemented.

Overnight Risk-Free Rates

At present, LIBOR is published for seven different borrowing periods in five different currencies: the US dollar, the Euro, the British pound sterling, the Japanese yen, and the Swiss franc. The main characteristics of LIBOR are its incorporation of banks’ credit risks for long-term lending activities and the fact that it is a forward-looking rate. However, none of the alternative risk-free rates (RFRs) put forward to replace LIBOR have comparable characteristics, and a single equivalent replacement rate has not been formulated. In addition, not all proposed RFRs are published yet (and their publishing times vary), and having multiple RFRs would potentially lead to IT hindrances for the currently operated systems.

As term-rate solutions have still not been put into effect, overnight RFRs are currently the viable alternative to LIBOR. Due to the lack of a concerted effort on the international level to come up with a single replacement rate for LIBOR, different overnight rates have been advanced for the various currencies currently published by LIBOR. These include: (i) SONIA (Sterling Overnight Index Average) – an unsecured overnight rate administered by the Bank of England; (ii) ESTER/€STR (Euro Short-Term Rate) – an unsecured overnight rate administered by the European Central Bank; SARON (Swiss Averaged Rate Overnight) – a secured overnight rate administered by the SIX Swiss Exchange; (iii) TONA (Tokyo Overnight Average Rate) – an unsecured overnight rate administered by the Bank of Japan; and (iv) SOFR (Secured Overnight Funding Rate) – a secured overnight rate administered by the Federal Reserve Bank of New York.

Term-Rate Alternatives to LIBOR

These RFRs are not suitable for the purposes of the syndicated loan markets. Thus, term-rate alternatives have to be established, with the two main alternatives put forward by the Loan Market Association (the LMA) based on either (i) forward-looking overnight index swaps that reference RFRs, or (ii) backward-looking term rates that are compounded over a certain period of time.

At present, no forward-looking rates have been established. The various working groups are at different development stages, with: (i) a term rate for Sterling that may be available for Sterling in the first three months of 2020, depending on the liquidity of the overnight index swaps market; (ii) the ARRC working on having an administrator to produce a forward-looking rate for US dollars, but only once the SOFR market for derivatives is liquid enough; and (iii) the Euro Working Group set to produce a plan for evaluating fallbacks to EURIBOR which are either forward- or backward-looking.

Backward-looking rates are being evaluated by all working groups.

Changes to the Credit Documentation and the Bulgarian Perspective

The LMA has issued several notes and recommendations for the upcoming transition, including a new clause in the loan documentation for replacing screen rates. The purpose of such a clause is to produce a solution for the new credit lines in the transition period, whereas for the existing exposures the lenders will propose amendments to the loan documentation already in force. The expectation that lenders will propose such amendments could be problematic, especially if the exposure occurs during the restructuring phase or if the borrowers do not agree with the approach being proposed. In this respect, the LMA is proposing to work on a form of reference rate selection agreement that can be entered into by parties to an LMA-based facility agreement to streamline the amendment process. 

The Bulgarian syndicated market makes no exception to the use of LIBOR. As the majority of the lenders in Bulgaria are majority-owned by larger European financial groups, the intention on the local market is to wait for a group decision to be put in place, and subsequently to follow suit. In practice, Bulgarian banks are well-positioned to transition to an alternative rate, as they went through a similar exercise in the past year: in June 2018, the Bulgarian National Bank stopped publishing the SOFIBOR term rate, which forced the local credit institutions to amend a significant number of loan documents within a short period of time. Thus, the market will not be unprepared to face the challenges that will arise through the discontinuation of LIBOR

Dimitar Zwiatkow, Partner, and Ivan Gergov, Associate, CMS Sofia

This Article was originally published in Issue 6.9 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

Boyanov & Co. has advised Eurobank Bulgaria AD on the merger and absorption of Piraeus Bank Bulgaria AD.

The Bulgarian National Bank cleared the merger on October 15, 2019, and the deal closed on November 12, 2019.

Eurobank Bulgaria already owned 99.98% of Piraeus Bank Bulgaria. 

The Boyanov & Co. team was led by Partner Yordan Naydenov and included Senior Associate Borislav Notovsky.

DGKV has advised a consortium of lenders including the London-based investment firm Blantyre Capital Limited, the EBRD, and the Bulgarian Development Bank on the financial restructuring of Bulsatcom EAD – the largest Bulgarian TV and satellite operator. Kirkland & Ellis advised Blantyre Capital and Bulgarian Development Bank on matters of English law and Pillsbury Winthrop Shaw Pittman advised the EBRD. Bulsatcom was advised by Bulgarian solo practitioners Gergina Kyoseva and Liliya Tsoncheva.

According to DKGV, the “work involved an enforcement by means of appropriation, enforcement under Bulgarian law, the subsequent restructuring of approximately EUR 80 million of existing debt, assistance on settlement and restructuring of commercial debts in excess of EUR 200 million and the advancement of EUR 30 million of new secured debt to the Bulsatcom corporate group.” 

The DGKV team was led by Partner Georgi Tzvetkov and included Partner Nikolai Gouginski and Senior Associate Kaloyan Krumov.