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CONTEXT AND TRENDSThe picture across the financial and corporate sphere in Bulgaria is fairly bleak with firms only seeing strong pipelines of deals in a few key areas.In banking, new lending is low, as it is all over Europe....
CONTEXT AND TRENDS
The picture across the financial and corporate sphere in Bulgaria is fairly bleak with firms only seeing strong pipelines of deals in a few key areas.
In banking, new lending is low, as it is all over Europe. While liquidity is the cause of this to a certain extent, most practitioners blame the Country's overzealous regulatory system. "Banking regulations are too restrictive so there is barely any bank lending. We are hoping harmonisation with financial institutions may make the system more flexible from mid 2012. Obviously this was good to avoid instability but we need to move forward now and not limit business potential to stop stagnation," says one partner. Local Bulgarian banks themselves also come in for criticism for their strategies. "They are conservative in lending decisions but they have started to finance/find new products in order to obtain assets, but we need more," says another finance lawyer.
In capital markets the story is equally uninspiring: "Very little," says one partner, "liquidity is slim, there are few listings. Although there are some interesting bond issues underway in an advisory capacity." It is a similar story in M&A although some firm's report a pick up in distressed acquisitions. "The bulk of the work is in the distressed restructuring sectors, so there has been a boost to M&A work, due diligence mostly, in food processing and telecommunications. These two industries are moving in because they see the Bulgarian government as trustworthy in terms of how they weathered the storm," says one partner.
The two areas where there is more activity are project finance and restructuring and insolvency, but even here there are clear caveats to the good news. In projects one partner says: "We are seeing renewable energy as well, especially in solar and wind due to favourable feed-in tariffs, although these tend to be small." Another partner bemoans the lack of true new financing: "Most of the work is limited to the regulatory practice and the refinancing of foreign corporate loans and local banks subsidiary loans."
The market wasn't helped when the state abandoned plans to build the Belene nuclear power plant, though plans have been announced to construct a new gas power plant instead.
In restructuring and insolvency, while there is work to be had, the general environment leaves something to be desired. "Banks are lobbying hard for retrospective bankruptcy dates and insolvency laws are pending," says one partner, "but Bulgarian courts remain a huge problem."
Within the legal market itself, in contrast it would seem to the amount of work around, firms report increased competition and even point to improving standards of service across the board. "The quality of the work has really shot up, transactions are quicker and firms are co-operating more with each other to resolve issues," says one partner. "We are seeing increased competition for mandates, even in the busy areas like renewables," says another.
RISING STARSDjingov Gouginski Kyutchukov & VelichkovZdravka Ugrinova
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