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The Buzz in Slovenia: Interview with Tine Misic of ODI Law

The Buzz in Slovenia: Interview with Tine Misic of ODI Law

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“Generally speaking,“ Tine Misic, Partner at ODI Law says, “the Slovenian market and the economy are doing well, our long-term debt has been upgraded to AA- by S&P, which means Slovenian bonds are highly ranked, and the GDP is growing at about 3.1%, [which is] relatively high compared to other EU countries.“

This blossoming economic situation is directly benefiting some sectors of the economy – Misic singles out real estate, residential property, and services – although he says the manufacturing sector is “slowing down a little bit.“ Given that Slovenia is heavily export-orientated, Misic believes that related economic sectors will “potentially feel reverberations, especially given the slow-down in the German market – producers will brace for lower rates of orders in the coming months.“

Turning the subject to his expectations for new legislation, Misic says: “First, we need to mention the Slovenian bail-in – that is to say, the decision of the Constitutional Court, pursuant to a CJEU decision, that the State must adopt a law allowing damage compensation upon the 'no creditor worse off' principle to investors and creditors who were damaged by the writing-off of subordinated financial instruments issued by six Slovenian banks.“ The draft of that law has been adopted by the Government and is currently in the advanced stages of Parliamentary procedure. The Bank of Slovenia will be “obligated to cover any such damages,“ he says, noting that there may be additional judicial challenges to the law once it is passed.  

The second legislative change that is frequently discussed, he says, regards proposed tax reform. “The Government has adopted a tax reform package and has sent it to the Parliament,“ Misic states. “The biggest new thing is the increase of the corporate income tax rate from 19% to 20% — and the capital gains tax rates are being raised as well.“ The proposed reforms are already affecting the behavior of businesses, he believes, with “certain M&A activities, for example, already changing to reflect these changes.“

Misic also mentions two developments that may have significant reverberations on the market. The first is the filing for bankruptcy by Slovene airline Adria Airways, which “will certainly lead to attempts by large foreign airlines to fill this market gap and seize the business.“  The second is the conclusion of the privatization process of Slovenian banks, “following the IPO of NLB – the largest State-owned bank and the acquisition of Abanka, the second-largest State-owned bank in Slovenia, by U.S. Apollo-owned Nova KBM.“ The privatization process, he says, was made to satisfy a “demand made by the European Commission, to have the largest banks privatized over time.“  

Finally, for market activity, Misic reports that there have been “substantially fewer“ NPL-related transactions, as banks clear their balance sheets. With transactions decreasing, he says, the “NPL hotspot“ has shifted away from Slovenia to Croatia and Serbia, where NPL-related transactions are “booming.“

Wrapping up, Misic refers to two infrastructure projects currently underway in Slovenia. “There’s the construction of the Karavanke tunnel in the Slovenian-Austrian Alps, which is in a bit of a stall,“ he says, as the Slovene National Review Commission is still reviewing some parts of the project. The other project is the construction of the second railway between Divaca and Koper. “The estimated total value of the project is EUR 1.2 billion, and the Government has created an SPV to handle activities related to it,“ he says. He reports that there are almost certainly going to be some tender awards challenges by “unhappy investors“ but that construction is expected to start sometime next year, and that preparatory works are already underway.