The Deal: In April 2019 CEE Legal Matters reported that Clifford Chance Badea had advised Alpha Bank Romania on its EUR 1 billion direct issuance global covered bond programme – the first-ever in Romania. RTPR Allen & Overy advised Barclays Bank PLC as arranger on the programme, which came three years after the country’s covered bond law entered into force.
- Counsel for Alpha Bank Romania: Madalina Rachieru, Partner, Clifford Chance
- Counsel for Barclays Bank PLC: Andreea Burtoiu, Counsel, RTPR Allen & Overy
CEELM: Madalina, how did you and Clifford Chance become involved with Alpha Bank on this matter?
Madalina: It was a combination of factors, starting with our team’s involvement in the preparation of the current Romanian covered bonds law, our reputation as a leading Capital Markets law firm, and our collaboration with Alpha Bank Romania on previous projects.
We were at the core of the new Romanian covered bond legislation that came into effect three years ago. Since 2010, I have worked side by side with the Romanian Banks’ Association, the National Bank of Romania, and the Romanian Financial Supervisory Authority to draft a new legal framework in this area, aligning Romanian legislation with European standards and practices.
We have also built a reputation as the leading law firm assisting on complex transactions that shape the business environment (first-of-its-kind transactions).
It was, therefore, a natural choice for Alpha Bank Romania to consider selecting as legal counsel the firm that helped bring this new legislation to life and who would also be able to assist in introducing a new instrument on the local market.
CEELM: Andreea, how about you? How did you and RTPR Allen & Overy become involved in this matter?
Andreea: Allen & Overy has a long history of assisting Barclays Bank PLC on various other complex and first-of-their kind matters in the past.
CEELM: What, exactly, was the initial mandate when you were each retained for this project, at the very beginning?
Madalina: We were approached by Alpha Bank Romania at a very incipient phase of the project, in January 2017, when Alpha Bank Romania and Barclays were exploring the features of the Romanian covered bonds legislation and to what extent they could implement a covered bonds programme in Romania.
Further to that analysis, a significant number of queries resulted and Alpha Bank Romania, which knew that I had assisted the Romanian Banks’ Association in preparing and agreeing with the National Bank the Covered Bonds Law, determined that our team would be best placed to shed light into Barclays queries.
Once the structure issues had been clarified, Alpha Bank Romania decided to launch a covered bonds programme and we were mandated to assist Alpha Bank Romania on all aspects of the programme, in particular in relation to the base prospectus, the negotiation of all the contracts (cover pool monitor agreement, covered bondholders representative agreement, mortgage agreement, deed of charge, servicing agreement, agency agreement, etc.), the approval of the programme by the National Bank, the corporate approvals, the publicity formalities for the mortgage over the cover pool, issuing legal opinions, etc.
Andreea: Considering the novelty of the envisaged mandate for the Romanian market, our appointment was structured as a two-stage process: in the first stage of our appointment, we assisted with various structuring matters. Once these had been solved, we continued with the preparation of the relevant documentation for the program.
CEELM: Who were the members of your teams, and what were their individual responsibilities?
Madalina: As lead partner, my main tasks were [managing] the relationship with ABR and the other parties, considering the numerous structure issues that arose during the process due to the fact that it was a first-of-its-kind transaction, and providing overall supervision of the transaction and all of the documents.
Counsel Radu Ropota was in charge of the day-to-day management of all the aspects of the transaction, assisted by Associate Georgiana Evi. Also, Associate Yolanda Ghita-Blujdescu supported the team on various regulatory issues.
As our office in Bucharest operates as a fully integrated part of the firm’s international network, we were also able to consult with Partner Christopher Walsh and Associate Theodoros Kotsiras, from our London office, on various issues related to the contractual documentation.
Andreea: I and Partner Victor Padurari led the RTPR Allen & Overy team and managed the transaction. Our team involved in this project also included Andreea Chiriac, Lia Ilie, and Ioana Ilie, lawyers specialized in finance and capital markets deals.
CEELM: How was the programme structured, ultimately?
Andreea: The transaction was structured as a programme, with the first issue in the amount of EUR 200,000,000 being made around the time of the establishment of the programme. Programmes are generally preferred to individual issues when the issuer envisages further issues; this is because all documentation is agreed upon at the establishment of the programme and hence subsequent issuances can take place more efficiently from both time and cost perspectives; at the same time, a programme will also expedite things at the investors’ end for future issuances and shows the issuer’s commitment to developing a long-term sustainable product. As Alpha Bank Romania’s programme was the first established under Romania’s covered bonds legal framework, our involvement consisted of harmonizing the parties’ expectations with the requirements of the Romanian law.
CEELM: What was the most challenging or frustrating part of the process? Why?
Madalina: First-of-their-kind deals usually face specific delays generated mainly by legal challenges that require flexibility and innovative solutions.
In this particular case, the work was extremely intense, given the complexity of the project. Among other things, we had to align all contractual mechanisms so that the rights and duties of all parties involved could still function in practice.
The main challenge came from the fact that Romania’s covered bonds law was inspired from the German Pfandbrief Act, while the covered bonds programme was governed by English law. We needed to identify innovative solutions that satisfied Romanian law specificities while still keeping the features of the various English law concepts of the programme.
Andreea: Indeed, since this is the first transaction made under Law No. 304/2015, we had to break ground on a number of aspects. Throughout the process, various aspects needed to be solved and/or alternative solutions identified, keeping in mind that that, on the one hand, the Romanian legal framework was new and modern, but did not and could not address in extensive detail the complex mechanics of an international covered bonds issue, and on the other hand, well-established international covered bonds practice and expectations.
CEELM: Was there any part of the process that was unusually or unexpectedly smooth/easy?
Madalina: We worked very well and efficiently with the team of Alpha Bank Romania, which was very professional thorough the whole process.
Andreea: Considering that all parties involved had the common goal of getting the transaction finalized, all parties involved cooperated continuously for such purpose. Effective communication and availability of all parties were strong points during the process. Moreover, the legal advice of both parties was undertaken by highly experienced teams with considering capital markets experience on this type of transactions, which we believe made the process smoother.
CEELM: Did the final result match your initial mandate, or did it change/transform somehow from what was initially anticipated?
Madalina: The structure of the programme kept being adjusted during these two years in order to cater to the particularities of the Romanian legislation and the feedback received from the National Bank. We also needed to accommodate the requirements of various parties who later joined the project (the rating agency, the cover pool monitor, the covered bondholders’ representative, etc).
We addressed various queries raised by Moody’s in order to be able to issue its rating and comments from the National Bank of Romania. We also dealt with the approval of the prospectus by the Commission de Surveillance du Secteur Financier and the listing process on the Luxembourg Stock Exchange and the Bucharest Stock Exchange.
The fact that we had a very good relationship with Moody’s even from the time when we were in the process of preparing the Covered Bonds Law and our previous experience in secondary listings of other bonds on the Bucharest Stock Exchange expedited and significantly smoothed the interaction with the other parties.
As mentioned, the main challenge was to identify solutions that took into account the expectations of the National Bank and of the other parties and the Romanian law specificities, while still keeping the features of an international market standard programme.
Andreea: The mandate remained along the original lines, however due to the novelty of the transaction on the Romanian market, the timing for completing the transaction was longer than originally envisaged. The structure had to be fine-tuned along the way to accommodate specific requirements either from the issuer’s side or from the other parties involved: the asset monitor, the prospective covered bondholders representative, and the regulator.
CEELM: What specific individuals at Alpha Bank Romania directed your team’s work, and how did you interact with them?
Madalina: The Alpha Bank team was coordinated by Periklis Voulgaris (Wholesale Vice-President) and mainly included Emil Mitescu, Eduard Istratescu (Legal Manager) and Nicoleta Ruxandescu (Deputy CEO of Alpha Finance Romania).
But I should also mention the fact that, without the involvement of Mr. Sergiu Oprescu (the CEO of Alpha Bank Romania) in the process of drafting the covered bonds legislation and the discussions with the National Bank, the enactment of the current legislation which allowed the covered bonds programme to be established would probably not have been successful.
CEELM: How about you, Andreea? What specific individuals at Barclays Bank PLC directed your team’s work, and how did you interact with them?
Andreea: Our team’s work was generally coordinated by the structuring team at Barclays Bank PLC, and in particular by Director Elena Bortolotti. The team at Barclays Bank PLC are greatly experienced in covered bonds transactions and hence guided all teams involved so as to achieve a great end result.
As part of our involvement in the transaction, we also worked closely with Alpha Bank Romania S.A.’s team, including Periklis Voulgaris, Emil Mitescu, Nicoleta Ruxandescu, Eduard Istratescu and Ioana Dumitrescu.
Considering the international component of this transaction, the majority of our work was generally carried out by phone and email, although several meetings were also held in person in Bucharest. The novelty of the overall transaction lead to extensive correspondence and conference calls either between all parties or sub-divided into legal or commercial workstreams/parties. Barclays Bank PLC and our teams were always available for discussing, sharing prior experience and finding new ways going forward.
CEELM: How would you describe the working relationship with RTPR Allen & Overy on the deal?
Madalina: Radu Taracila Padurari Retevoescu is a professional team which we have met in past transactions and, therefore, our work together was efficient and beneficial to all parties involved. Our interpretation of the Romanian law particularities was similar and, as such, we worked together to identify constructive solutions.
Due to the fact that most of the contracts were drafted by Allen & Overy in London, a large amount of work was done by email and we negotiated mainly by conference calls. There were also weekly conference calls to discuss the progress of the project and planning ahead.
CEELM: What about you, Andreea? How would you describe the working relationship with Clifford Chance on the deal?
It was great to have on the other side of the table an international law firm of comparable caliber, which had a highly-qualified team involved on this deal. Having all the parties advised by top international law firms (both having extensive experience in similar transactions in other jurisdictions) helped a lot in completing such a complex and novel transaction. I would describe our working relationship with CC on this transaction as a deal between professionals who were committed to closing the deal in the best interests of their clients.
CEELM: How would you describe the significance of the deal to Romania, or to the region?
Madalina: With the covered bonds issued by Alpha Bank, Romania has finally joined the other EU countries which have active covered bonds markets.
I am confident that this is a major step for the Romanian economy in general, as it allows the expansion of financial intermediation and stability in the financial system – it is known that banks with a broad and diversified range of funding tools are more resilient.
Covered bonds are viewed as low-risk investments and help diversifying the funding structures of banks and securing sources to support lending growth. Its positive impact can also be transferred to banks’ individual clients through lower costs in real estate loans.
Andreea: The programme established by Alpha Bank Romania S.A. is the first covered bond programme established in Romania. We are therefore privileged to be part of the team that finalized this pioneering transaction on the Romanian market. Covered bonds are a feasible financing solution for the banks in Romania and until now we had a modern but untested legal basis, and a well-established international practice of bond issues, but no local experience. With this first covered bonds programme, credit institutions are more likely to consider covered bonds as a feasible instrument for attracting liquidities.
This deal marks another “first” for the Romanian capital markets.
This Article was originally published in Issue 6.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.