Country Writer: Bruno Leroy
GIDE LOYRETTE NOUEL
Tel: +40 21 223 03 10
www.gide.com

FIRM PROFILE

Gide Loyrette Nouel is the leading international law firm in France with more than 450 lawyers (including 82 partners) working in Paris and in its 16 overseas offices.

Gide Loyrette Nouel has been present in Romania since 1993. Our permanent office opened in 1998.

GLN Bucharest is committed to provide highly qualified legal services, specially and creatively tailored to the needs of each client.

GLN Bucharest's team has proven its outstanding skills in major projects in Romania undertaken by clients coming from various jurisdictions. GLN Bucharest forms part of a strong network of offices in Budapest, Istanbul, Moscow, Prague and Warsaw which serve clients throughout the Central and Eastern European region.

ROMANIA SECURITISATION MARKET STATEMENT

Substantial openings for structuring new financing techniques exist currently in Romania, mainly through the significant development of leasing activities in the last five years. Factoring and forfeiting activities carried out by some banks, are yet to be well recognized within the financial market as alternative methods of financing.

The 1999 legislation on mortgage credit for real estate investments has been recently detailed by secondary legislation and enriched with rules governing mortgage credit companies, thus creating a quasi-comprehensive legal framework capable of supporting the civil construction industry, in particular the housing market, which records a steadily increasing demand throughout the country. It is expected that the development of mortgage financing will be the first one to generate opportunities for securitisation transactions in Romania, although presently there is no general legal framework governing securitisation transactions.

Nevertheless, existing legal mechanisms could be used to structure securitisation transactions.

In principle, the purchase of receivables on a regular basis, with title of business, could be carried out by any legal entity which registered with the trade registry such a purpose of business.

An assignment of receivables, including future receivables, is valid under the Romanian Civil Code and does not require the approval of the debtor. Furthermore, under the security interest legislation, perfection is ensured through the registration of the receivable assignment in the Electronic Archive of Real Security Interests in Movables. On the other hand, an assignment of mortgage receivables must be notified by registered mail by the assignor to the debtor within 10 days it is entered into.

General provisions of bankruptcy proceedings are applicable to such assignments, provided that if the target entity is a bank, the special provisions of the Banking Bankruptcy Act are to be considered.

Under current Romanian law, the receivables assignee organized as a legal person would not benefit from tax transparency, but individuals investing in securities enjoy a preferential income tax regime, while interest on mortgage bonds issued in relation to housing construction industry is income tax exempt.

The issue of securities on capital markets can take place by public offer and requires the prior approval of the National Securities Commission (CNVM).

As far as the credit mortgage is concerned, two kinds of securities can be issued. In order to refinance the loans, the mortgage lenders are authorized to issue mortgage bonds up to 60% of the aggregate face value of their mortgage receivables portfolio. In addition, the mortgage lenders or their assignees can issue a special type of dematerialized mortgage titles up to 75% of the aggregate face value of their mortgage receivables portfolio, provided that if one and the same entity issues both types of securities, it should observe a general threshold of 75% of the aggregate face value of its mortgage receivables portfolio held upon the latest issuance. Both of these financial instruments may be traded on the capital markets under the supervision of the National Securities Commission (CNVM).

As regards cross border transactions, the Romanian foreign exchange market has been liberalized gradually. Presently, most of the securitisation type transactions require no longer the prior authorization of the National Bank of Romania (BNR). Nevertheless, any transaction which would qualify as a medium or long term credit (i.e. in excess of one year) needs to be notified to the BNR for registration in the external private debt registry. The general liberalization process will be enhanced by January 1, 2004 and hopefully finalized upon the accession of Romania to the European Union. Presently, the issuance and listing of securities of Romanian entities on foreign capital markets do not require the authorization of the National Bank of Romania.

As Romania is scheduled to join the European Union at the latest in 2007 and is making considerable efforts to harmonize its legal framework as soon as possible, the financial market and, in general, the business environment expect and lobby for accelerated measures to encourage the development of securitisation in Romania.

GLN ROMANIAN SECURITISATION CONTACT

Bruno Leroy

GLN SECURITISATION PRACTICE