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Kinstellar has advised APS Holding, a Czech financial group covering Central and South Eastern Europe, on the acquisition of an unsecured consumer-loan portfolio worth more than EUR 50 million from a leading Bulgarian consumer credit institution. According to Kinstellar, the deal is the largest such transaction in Bulgaria to date in 2015.

The firm describes it as “a challenging assignment, involving intense negotiations to secure a binding preliminary agreement for the portfolio within a very ambitious deadline.” Kinstellar also reports that “the finalization and closing of the transaction had to further address various interesting and challenging issues, such as administration of the portfolio in the interim period between signing and closing, satisfaction of a number of preliminary conditions, issues related to the notification of more than 100,000 debtors, stepping into any initiated enforcement proceedings, liability of the seller in case of defective receivables, etc. From the merger control perspective, the deal also required a sound compliance analysis.”

The Kinstellar team consisted of Partner Diana Dimova and Managing Associate Svilen Issaev in Bulgaria, assisted by Counsel Dessislava Fessenko and Senior Associate Nina Tsifudina. In the Czech Republic the firm’s team included Managing Partner Lukas Sevcík, Counsel Jan Juroska, and Associate Michal Kniz.

Tuca Zbarcea & Asociatii (TZA) has announced that it advised on Romanian elements of GKN plc’s July 2015 acquisition of Fokker Technologies Group BV from Arle Capital, working alongside global counsel Greenberg Traurig Maher.

The acquisition enterprise value was EUR 706 million, consisting of EUR 500 million of consideration for the share capital of Fokker Technologies Group BV, and assumption of an additional EUR 206 million on liabilities as of December 31, 2014. Completion of the acquisition is expected to take place in the fourth quarter of 2015 following completion of the consultation and information procedures with the Fokker Works Council and trade unions, ITAR and CFIUS regulatory clearances, and anti-trust clearance in the EU and the US. Once the acquisition is completed, Fokker, under its current leadership, will become a new operating unit within GKN Aerospace. 

GKN is a global engineering group that designs, manufactures, and services systems and components for the world’s manufacturers. It employs over 50,000 people and recorded 2014 sales of GBP 7.5 billion. GKN Aerospace, one of GKN’s four divisions, is a world leading global first tier supplier of airframe and engine structures, components, assemblies, and transparencies to a wide range of aircraft and engine prime contractors and other first tier suppliers. It reported sales of GBP 2.2 billion in 2014 and has a global workforce of over 12,000 employees.

Headquartered in the Netherlands, the Fokker Technologies Group is a specialist tier one aerospace supplier in aerostructures, electrical wiring systems, landing gear and associated services, across commercial, military, and business jet end markets. The company was founded in 1919, it operates facilities in Romania, the Netherlands, Turkey, Canada, Mexico, USA, China, India, and Singapore, and employs approximately 4,900 people. Its reported revenue in 2014 was EUR 758 million, along with EBITDA of EUR 76 million and operational EBIT of EUR 53 million. As of December 2014, Fokker had total assets of EUR 814 million.Fokker reports that it generated 30% of its 2014 revenue in military end markets and 20% in business jets. The company also has a 43.57% shareholding in the Societe Anonyme Belge de Constructions Aeronautiques.

GKN estimates that it can generate operational improvements similar to those achieved in previous acquisitions and has identified potential cost savings and efficiencies equivalent to 3% of sales by 2018. 

Arle Capital Partners is an international private equity manager managing EUR 2 billion of investments for a diverse, global investor base. 

The TZA team of lawyers was led by Partner Catalin Baiculescu.

The Greenberg Traurig Maher team advising GKN on the acquisition was led by Paul Maher and Fiona Adams with support from Karoline Tauschke, Ife Dorgu, Graham Iversen, Gary Bellingham, Cate Sharp, Aonghus Heatley, Amrik Bhella, and Christopher Ives in London; Martijn Hermus, Paul Westhoff, Rob van Eldik, Alex Westerman, and Eva Herde in Amsterdam; and Hugo Lopez Coll, Javier Betancourt Escobar, and Adriana Garcia-Cuellar in Mexico City.

On 30 September 2015, the European Commission (the “Commission”) made amendments to the Solvency II Commission Delegated Regulation (EU) 2015/35, which included introducing a new asset category: “qualifying infrastructure investments”. The amendments adopt with very little modification the technical advice provided to the Commission by EIOPA on 29 September 2015.

The new asset class will constitute a more tailored treatment of investments in infrastructure projects, identified as a priority in the “Omnibus II” Directive, in order to encourage long-term investment in a broad range of infrastructure projects, including innovative projects, systems and networks. It seeks to do this by creating an appropriate risk calibration for infrastructure investments, removing unjustified prudential obstacles and creating better incentives for insurers to invest in infrastructure projects by reducing the amount of capital they must hold against the debt and equity of qualifying infrastructure projects.

Capital charges applying to infrastructure investments under Solvency II will be reduced according to a modified credit risk approach. Infrastructure equity investments will now have a risk calibration of, broadly, 30% of their value, compared to 49% for unlisted equities, into which category most infrastructure project equities fall under the current regime.

The amendments also affect investment in European long-term investment funds and equities traded on multilateral trading facilities, giving the former lower capital charges and the latter the same capital charge as equities traded on regulated markets (39%). Capital charges relating to qualifying infrastructure investments structured as bonds or loans have also been significantly reduced for various maturities and credit quality steps.

Other amendments introduced include extending the benefit of the transitional measures under Solvency II, which currently only cover equities traded on regulated markets, to all equities in order to avoid an undesirable disinvestment from equities. The transitional measures will phase out previous capital charges and phase in new charges, over a period of seven years, for equities purchased before the end of 2015.

QUALIFYING INFRASTRUCTURE INVESTMENTS

Which infrastructure investments qualify for the new asset class will be decided on a broad range of criteria rather than a list of qualifying industries in order to ensure that innovative projects are not unfairly excluded. Eligible infrastructure investments must exhibit a better risk profile than other equity or debt investments. The criteria will include provisions requiring that infrastructure projects are able to generate predictable cash flow and withstand stressed conditions and have a contractual framework that offers a high level of protection to investors. Qualifying infrastructure assets should also be owned, financed, developed or operated by an infrastructure project entity that does not perform any other function.

More robust risk management requirements are to be applied to qualifying infrastructure investments, building on the Solvency II requirements. Provisions are added requiring high-level due diligence and active performance monitoring. It is not thought that these requirements will present a significant hurdle for most firms, as they are likely to already have such systems in place. The due diligence requirements will be particularly pertinent for more innovative projects.

NEXT STEPS

The European Parliament and the Council have up to three months to exercise their right of objection, with the possibility of extending that period for another three months if they so wish. Either institution could also reject the amendments. If neither institution objects to or rejects the amendments, they will be published in the Official Journal of the European Union and will enter into force the day after publication.

The Solvency II standard formula is expected to be reviewed in 2018, which will include a review of the provisions dealing with qualifying infrastructure investments.

Currently, the new asset class excludes corporate investment in infrastructure companies, but the Commission and EIOPA will review whether qualifying criteria can be established for corporate structures that perform similar functions to infrastructure project entities and which have a similar risk profile.

By James C. Scoville, Partner, Edite Ligere, Associate, Benjamin J. Lyon, Associate, Debevoise & Plimpton

Greenberg Traurig has advised Pekao Investment Banking S.A., Ipopema Securities S.A., and Vestor Dom Maklerski S.A. — the managers of AAT Holding S.A.’s IPO — on the offering and admission of AAT Holdings’ existing shares to trading on the Main Market of the Warsaw Stock Exchange. Weil Gotshal & Manges advised AAT Holding on the IPO.

The value of the transaction amounted to PLN 57.5 million (approximately EUR 13.5 million). 

AAT Holding is the largest Polish producer and supplier of electronic security systems. Its portfolio includes fire alarm systems, CCTV, burglar antitheft alarms, access control systems, and other warning systems. 

Greenberg Traurig’s team was led by Local Partner Pawel Piotrowski, supported by Associate Agata Wisniewska.  

Editorial Note: After this article was published, Weil informed us that their team advising AAT Holding consisted of Partners Anna Frankowska, Piotr Tomaszewski, and Robert Krasnodebski, and Associates Anna Blonska, Marek Maciag, Natalia Wolkowycka, and Marek Kanczew.

Image Source: aat.pl

Former Kinstellar Managing Associate Zsolt Csanadi has left the firm to become the new Chief Legal Officer of MVM Hungarian Electricity.  

MVM Group (Magyar Villamos Muvek Zartkoruen mukodo Reszvenytarsasag (the Hungarian Electrical Works Private Limited Company) is the largest Hungarian power company responsible for the production, distribution, and sale of electricity. It owns several power plants, including the Paks Nuclear Power Plant (which has a total installed capacity of 2,500 MW and 3,501 km of transmission lines).  

Csanadi has ten years of experience with Kinstellar (the first 3.5 coming with Linklaters, before that firm withdrew from Hungary and the office reformed as Kinstellar in 2009). He specializes in the electricity and natural gas sectors, and MVM describes him as having “wide-ranging experience in the areas of the development and financing of conventionally fired power plants, renewable energy source-based projects, and energy infrastructure and projects.” The company also describes him as “expert in drafting and negotiating medium- and long-term power purchase, natural gas transport and other energy trade agreements; counselling on Hungarian and European Union energy law, climate protection and regulation; and in the settlement of complex energy rights disputes before Hungarian and international arbitration courts, ordinary courts and out of court.” He obtained a law degree at the University of Szeged in Hungary, and then got his LL.M. from the University of the Pacific McGeorge School of Law.

Squire Patton Boggs has advised the leading CEE venture capital fund MCI.TechVentures on a recently completed minority share investment in iZettle, a Sweden-based mobile payments company, following the company’s Series D funding round.

iZettle offers various payment services and apps – from card readers for smartphones and tablets to registers to tools for increasing sales – to SME businesses operating in eleven markets, including Germany, Great Britain, France, and a number of Scandinavian and Latin American countries. Alongside the core business focused on the mPOS (mobile point of sale) market, iZettle is active in the area of credit risk online evaluation and the analysis of customers’ cash flows made in real time.

“The number of prospective clients, i.e., small and micro-sized businesses only in Europe, is estimated at the level of 20 million, said Sylwester Janik, Partner and Co-Manager of MCI’s growth and expansion fund. “ Latin America is a huge market where the banking penetration ratio is much lower than in Europe, therefore the growth potential for payment services is very big,” 

The Warsaw-based Squire Patton Boggs Corporate team advising MCI was led by Partner Michal Karwacki and Of Counsel Pawel Magierowski. Karwacki commented on the significance of the deal, noting: “We’re more than delighted to act for the MCI team on their latest technology investment. As this deal illustrates, FinTech, mobile payments and other technology and internet related projects are a rapidly expanding, fast-growth sector in Poland, Europe, and internationally.”

Image Source: izettle.com

Weil Gotshal continues to advise the Ad Hoc Creditors’ Committee (AHC), consisting of Franklin Advisers, Inc., BTG Pactual Europe LLP, TCW Investment Management Company, and T. Rowe Price Associates, Inc., in the restructuring of Ukraine’s sovereign debt. According to Weil, “the restructuring plays a critical role in securing Ukraine’s ongoing stability and economic recovery.”

On September 22, Ukraine successfully launched exchange offers in relation to 14 sovereign and sovereign-guaranteed Eurobonds with outstanding principal amounts of approximately USD 18 billion. This followed less than one month after Ukraine and the AHC agreed to Indicative Heads of Terms (IHT), following months of intense negotiations.  

Creditor meetings in relation to the 14 Eurobonds were held on October 14. In addition to new notes, creditors will receive a value recovery instrument in the form of a GDP growth warrant which was carefully structured to avoid certain flaws which had become synonymous with these types of instruments. It incorporates distinct mechanisms for value preservation and investor protection.  

In February 2015, Ukraine formally requested further funding from the International Monetary Fund and cancellation of its existing funding arrangements. In March 2015, the IMF announced the approval of a four year Extended Fund Facility for Ukraine. As a condition of that loan, Ukraine was required to procure additional savings through the restructuring of its sovereign and quasi-sovereign debt held by the private sector. 

The August 2015 agreement of IHT was achieved after numerous meetings with Ukrainian officials, the IMF, and U.S. Treasury officials. According to Weil, “the agreement is of significant political importance and has high political visibility in the European Union and United States.  

The Weil team advising the AHC is led by Restructuring Partners Andrew Wilkinson and Alex Wood with Lead Associates Kirsten Erichsen and Robert Peel — all in London — and a team of lawyers across the firm’s London and New York offices.  

Editorial Note: Ukraine is being advised by White & Case on the restructuring. The firm’s team is led by Partners Ian Clark, Michael Doran and Francis Fitzherbert-Brockholes, and includes Partners Charles Balmain, John Higham, Prabhu Narasimhan, Peita Menon, and Kevin Ng.  Key Associates working on the matter included Michael Bark-Jones, Graeme Dickson, Mariya Azbel, Ronan O’Reilly, James Clark, Martin Mojzis, and Matthew Chalk. 

New penalty system for unlawful dismissal

The 2012 Labour Code introduced significant changes concerning the compensation to be paid by employers in the event of unlawful dismissal.

Since the new rules apply to all unlawful dismissal cases commenced after the entry into force of the new Labour Code (ie, after July 1 2012), it has taken some time for these cases to be processed, and thus also for the potential pitfalls of the new regulations to be identified and conclusions to be drawn.

As part of this process, on March 31 2014 the Administrative and Labour College of the Supreme Court issued an opinion addressing the most important questions relating to the penalties for unlawful dismissal.

Under the previous Labour Code, in case of unlawful dismissal and upon the employee’s request, the employer was obliged to reinstate the employee to his or her original position. If this was impossible due to various circumstances (which was the situation in most cases), the employer was obliged to pay:

• lump-sum compensation amounting to between two and 12 months’ average salary; and
• full compensation for the damages suffered by the employee (including lost wages) from the date of termination.

The previous Labour Code stipulated that if a legal dispute arose, the date of termination correlated to the date on which the court ruling declaring the dismissal unlawful became binding. As such, employers were forced to bear the risk of lengthy and delayed court procedures.

As the previous regime put an unreasonably high burden on employers, the new Labour Code has introduced a new penalty regime for unlawful dismissal.

According to the new Labour Code, in case of unlawful dismissal and upon the employee’s request, the employer must pay compensation for the damages that the employee has incurred. Compensation for lost wages or lost income may not exceed an amount equal to 12 months’ absence rate. This new rule has two significant consequences:

• Compensation now relates only to the actual damage caused by the dismissal; and
• Damages arising from lost income are capped at an amount equal to 12 months’ absence rate.

Alternatively, employees may claim lump-sum compensation amounting to the absence rate due for their notice period instead of compensation for damages. In such case the employee need not prove damages suffered as a result of the dismissal. Such a claim could considerably simplify court procedures, although the amount of compensation that can be awarded to the employee is significantly lower.

Damages caused by unlawful dismissal

One consequence of the new penalty system is that – aside from the unlawful nature of the dismissal (the employer must still prove the lawfulness of the dismissal) – the employee must prove the exact damages suffered and their extent. In other words, the fact that the dismissal was unlawful does not automatically trigger the employer’s duty to pay full compensation for damages. Thus, the court must decide on the individual damages claims submitted by the employee and evaluate them separately, in accordance with the general rules pertaining to damage claims.

What type of damages typically arise in cases of dismissal? The most important is lost income or potentially lost social security and other benefits. Extra costs incurred as a result of unlawful dismissal may also be considered as damages; moral damages may also arise.

The law stipulates certain damages for which the employer may not be held liable, including:

• damages that were reasonably unpredictable at the time of dismissal (eg, the employee was unable to find a new job for several years, leading to damage to his or her health); and
• damages that could have been prevented or avoided by the employee.

With respect to the prevention of damages, the court usually expects employees to search actively for a new job following dismissal. If the employee finds a new job, but the remuneration is lower, the difference may be claimed from the previous employer as damages (ie, lost income).

Lost income – calculation, amount and enforcement

The amount of lost income is capped at an amount equal to 12 months’ absence rate. The law’s indication of 12 months often leads to confusion; this rule does not mean that the employee is entitled to the absence rate for a period of 12 months following dismissal. Rather, this amount serves as a cap up to which the amount of actual damages incurred may be claimed from the previous employer.

The opinion issued by the Administrative and Labour College of the Supreme Court also suggests that if the employee wishes to make damages claims for lost income, it is advisable first to establish the amount of the cap (ie, the amount equal to 12 months’ absence rate) before examining and deciding on the individual claims.

According to the Labour Code, for the purposes of determining lost income, the cash value of other regular benefits to which the employee was entitled (on the basis of the employment relationship) shall be taken into account in addition to lost salary. This means that under the correct interpretation of the legal provisions, claims pertaining to all types of lost income (eg, bonuses and fringe benefits) may be enforced within the aforementioned cap.

Another consequence of this new system is that if the employee finds a new job at a lower salary after the unlawful termination, it is possible that the amount of damages suffered by the employee (ie, lost income) may reach the aforementioned cap only after a relatively long period, especially if the salary difference between the two jobs is minimal.

In such case, the employee may have further damages claims after the court verdict has been issued, as the amount of the cap will not have been reached on the verdict’s issuance date. The fact that the courts may award compensation only for damages that have already occurred – not for future damages – makes this scenario even more probable.

Most practitioners consider that in such cases, employees may enforce their additional damages claims in a subsequent court case – even if, formally speaking, doing so could violate the concept of res judicata, which does not allow the same party to initiate legal proceedings to enforce claims arising from the same legal relationship.

Until a comprehensive new regulation on such situations is developed, employers that have dismissed employees unlawfully within the past three years (the period of prescription) cannot be certain that they will not face further claims made by their employees, even if litigation between them has already concluded.

By Dániel Gera, Attorney at Law, Schoenherr

Sorainen’s Lithuanian office has advised one of the first donut cafes in Lithuania, Spurgu Fabrikas — which operates under the Donut LAB brand — on its attraction of a EUR 100,000 investment intended to subsidize further development of Donut LAB cafes in Lithuania.

This year a new Donut LAB cafe has already opened in Kaunas and soon two new donut cafes will open in Vilnius. Andrius Zaveckas, founder and CEO of Spurgu Fabrikas, comments: “While drawing up our business we had a task set to create a network. Soon one Donut LAB will open in the VCUP shopping mall, the other one in Siaures Miestelis district. We hope that in a half a year we will also have several points of sale in Minsk.”

Sorainen represented Spurgu Fabrikas in negotiations with the unnamed investor and in drafting transaction documents. The firm’s team was led by Partner Sergej Butov, with support from Associates Giedre Adomaviciute and Karina Kuizinaite.

Image Source: www.facebook.com/donutLAB

Herbst Kinsky has advised the founders of finderly GmbH on the sale of shares in Shpock (“Shop in your pocket”), a flea market app for high class products, to Schibsted Classified Media. Schibsted now holds 91% of Shpock shares.

Shpock was founded in 2014 by finderly. The boot sale app has tripled its user base in the last 12 months, surpassed the 10 million user mark, and topped the ‘Lifestyle’ app rankings in 3 countries. The Shpock community sells and buys over EUR 2.5 billion worth of items and creates more than 1 billion monthly page impressions in the app.

Schibsted is a Scandinavian media group with over 6900 employees spread across 30 countries. It is listed on the Oslo stock exchange.

With Schibsted, said Shpock co-founder Katharina Klausberger, “we have a partner on our side that knows the classifieds business like no other! On the other hand, we bring our mobile experience and an extremely talented and hungry team into the game.”

The transaction was led by Partner Philipp Kinsky, supported by Associates David Pachernegg and Carl Walderdorff. The firm reports having supported finderly GmbH since its foundation, and described Partner Philipp Kinsky as “especially delighted with the rapid rise of Shpock giving Austria as a start-up location an important positive impulse.”

Editorial Note: Moments after this article was published, Partner Wolfgang Luschin of Austria’s HLMK Law Firm informed us that his firm had advised Schibsted Classified Media on the deal. Luschin led the HLMK team, supported by Partner Gerhard Hochedlinger.

Second Editorial Note: Herbst Kinsky informs CEE Legal Matters that Schibsted reportedly held 82% of Shpock shares before this recent transaction, which therefore apparently involved an acquisition of an additional 9% stake.

Image Source: news.shpock.com