IFLR 1000
The Guide to the World's Leading Financial Law Firms

The collapse of Lehman Brother in September 2008 hit the banking sector hard, after it had proved itself fairly resilient to the earlier effects of the financial crisis. Now, instead of looking at how to decrease their presence in the area, the European Bank of Reconstruction and Development and the International Finance Corporation are emerging as the main source of financing in an otherwise stagnant lending market....

The collapse of Lehman Brother in September 2008 hit the banking sector hard, after it had proved itself fairly resilient to the earlier effects of the financial crisis. Now, instead of looking at how to decrease their presence in the area, the European Bank of Reconstruction and Development and the International Finance Corporation are emerging as the main source of financing in an otherwise stagnant lending market.

The drop in leveraged and acquisition financing has been particularly large, following the trends of the M&A market across the whole of CEE.

The biggest changes for firms working on banking deals this year has been the shift back to lender-focused documentation, with covenants reflecting the norms of several years ago, as opposed to the covenant-lite structures common in the past two years.

Of course, in the absence of new bank lending, restructuring deals can now be relied on to provide a stream of work for banking lawyers now, as can negotiations of the numerous rescue packages and bailout plans put in place by governments across the region.

While last year Russia was riding high, seemingly oblivious of the shift that had taken place elsewhere in the region, the past year has been somewhat different. Securitisation remained surprisingly strong, but after Lehman Brothers collapsed the rest of the capital markets dried out fairly quickly....

While last year Russia was riding high, seemingly oblivious of the shift that had taken place elsewhere in the region, the past year has been somewhat different. Securitisation remained surprisingly strong, but after Lehman Brothers collapsed the rest of the capital markets dried out fairly quickly.

As for the rest of CEE, bright spots were few and far between, but the absence of a steady pipeline of deals meant there were perhaps more opportunities for one-off, more complex deals requiring intensive local legal work. The Polish debt markets flourished thanks to banks' capital raising efforts, with subordinated bonds used to boost balance sheets and fulfil capital requirements. This was combined with the effects of a regulatory loophole that allows state-owned companies to issue bonds outside of public procurement requirements, but not loans.

The equity markets were inevitably hit hardest, but a surprising number of IPOs still managed to complete, with several more ongoing and expected to be launched before the end of the year. And Warsaw remains a popular listing exchange, with Plaza Centers and Warimpex both making their debut in the past year.

One of the main topics on local lawyers minds, away from deals, is definitely Linklaters' withdrawal from the region, and the hand over of several of its former alliance offices to new entity Kinstellar. Both firms will take some time to establish their new positions in the region, with Linklaters remaining strong in Russia, and Kinstellar proving itself more than capable in both Bucharest and Budapest.

Despite a steep drop-off in M&A activity after September 2008, a healthy amount of private M&A in the mid-size sector has kept the market afloat in CEE this year. Add to this a few larger national and regional deals, and the sector looks to have had a relatively successful 12 months....

Despite a steep drop-off in M&A activity after September 2008, a healthy amount of private M&A in the mid-size sector has kept the market afloat in CEE this year. Add to this a few larger national and regional deals, and the sector looks to have had a relatively successful 12 months.

Instability across financial institutions saw increased activity in bank M&A, which is likely to continue well into the end of this year and beyond. And of course, corporate teams are also inevitably being kept busy by the large number of restructuring and reorganisations that companies are implementing to survive the downturn and emerge from it stronger.

This was particularly true in Austria, where restructuring mandates for banks compensated for the lack of pure M&A deals. Optimistic partners are predicting a return of private-equity investors to the market in late 2009, as long as a consensus is reached on when pricing bottoms out.

What partners are also looking for next is the arrival of the distressed investors, which is expected to arrive in a flood of deals across the region. Cash-rich investors are still out there somewhere, and once they identify an opportunity to make the most of a tightly-priced market, corporate partners will relish the opportunity to structure new deals.

Project finance in central and eastern Europe has survived the year's credit crunch surprisingly well. The combination of the need for improved infrastructure in some of the ex-Soviet states, with growing confidence from commercial banks about operating in these markets has ensured that projects have continued to provide lawyers with work over the past 12 months....

Project finance in central and eastern Europe has survived the year's credit crunch surprisingly well. The combination of the need for improved infrastructure in some of the ex-Soviet states, with growing confidence from commercial banks about operating in these markets has ensured that projects have continued to provide lawyers with work over the past 12 months.

Development banks have provided an additional boost, coughing up finance for endangered projects and ensuring that deals continue to tick over. The financial crisis has prompted sceptics to re-evaluate their criticism of development banks and their role in a modern economy, securing their influence for some time to come.

As flagged up by the IFLR1000 last year, road building projects have provided a particularly strong source of business, often using private-public partnership (PPP) structures. This trend looks set to continue with Russia developing its first PPP projects. Meanwhile real-estate demand has lessened but mandates for retail property, such as shopping centres, remains strong.