Country Writer: Jacques Bernard de Servigny
GIDE LOYRETTE NOUEL
Tel: +36 1 411 74 00
www.gide.com

FIRM PROFILE

Gide Loyrette Nouel is one of the most prestigious independent law firms in Europe. It is the leading international French firm with 82 partners and over 400 associates drawn from over 28 different nationalities. Operating out of 16 offices in 15 different countries world-wide, the Firm offers some of the most respected specialists in each of the various sectors of national and international business law.

The Firm has offices in Europe (Brussels, Bucharest, Budapest, Istanbul, London, Moscow, Paris, Prague and Warsaw), North America (New York), Asia (Beijing, Hanoi and Shanghai), the Middle East (Riyadh) and North Africa (Casablanca and Tunis).

HUNGARY SECURITISATION MARKET STATEMENT

Strong opportunities exist at present in relation to the carrying out of securitisation transactions in Hungary, although there is currently no specific legal framework in place for such transactions.

No major securitisation transaction has been carried out to date, mainly due to a certain lack of demand on the Hungarian market for such transactions up to now: the Hungarian economy is still mainly financed through its banks and financial institutions, which are highly developed in terms of own funds and therefore consumer credit remains at low levels.

However, the strong development of factoring activities would appear to indicate that companies are looking for different methods of financing. Consumer credit has grown, the own funds ratio of banks and financial institutions are decreasing and there are some commercial real estate projects that will require increased financing in the near future. It is therefore expected in the short to medium term that there will be a growing demand for new methods of financing, including by way of securitisation.

As regards the legal framework, there is no major obstacle to the structuring of a securitisation transaction. However, certain legal issues need to be taken into account. Firstly, the purchase of receivables in a business-like manner may be carried out by financial institutions, subject to the authorization of the State Supervision of Financial Institutions.

Secondly, receivables may be transferred by way of an assignment (as defined by the Hungarian Civil Code) to a special purpose vehicle (SPV). Under Hungarian law, the SPV must be a company limited by shares (Rt.) and need to meet certain capital requirements in order to obtain the authorization of the State Supervision of Financial Institutions for the purchase of receivables. Subject in both cases to the approval of the information memorandum and certain other documents of the State Supervision of Financial Institutions, such an entity may issue bonds as a private placement to qualified investors as soon as it has been set up and as a public offer at least one year after creation.

Furthermore, deconsolidation and the lack of control of the SPV as regards the assignor is an important issue in order to ensure the bankruptcy remoteness of the structure of the transaction.

Finally, the SPV does not benefit from tax transparency but corporate taxation is reasonable in Hungary and incentives have been adopted lately in order to encourage investments in traded securities.

Since there are no limitations in relation to foreign exchange, transactions managed from abroad are therefore possible. There has been no use as yet of credit derivatives as part of synthetic transactions. However, we do not see any legal obstacle in this field either.

As Hungary will join the European Union next year, harmonization of the legal framework is currently underway. Major improvements to the law in relation to issues such as bankruptcy remoteness or the assignment of future receivables are expected. Such changes should encourage market participants and accelerate the development of securitisation in Hungary.

GLN HUNGARIAN SECURITISATION CONTACT

Jacques Bernard de Servigny

GLN SECURITISATION PRACTICE