TC - Club - Stiri - ROMANIAN BUSINESS NEWS NOVEMBER 2011

Erste Group and BCR sign EUR 50 million loan with Mechel Group in Romania

Erste Group Bank AG and its Romanian subsidiary Banca Comerciala Romana (BCR) are granting a EUR 50 million loan to four Romanian steel production facilities, part of the Mechel holding. In 2010, iron & steel was one of the top 10 fastest growing industries in Romania, expanding by 35.1%. Over the next decade, iron & steel production in Romania is expected to continue growing by 4.1% a year on average.#

The loan agreement is one of multi-borrower, multi-currency type to finance the working capital, with collaterals (stocks and receivables) as well as with a letter of guarantee issued by the mother company Mechel OAO. The EUR 50 million represent the refinancing of some credits worth a total of EUR 35 million, to which a new financing line is added worth EUR 15 million.

In the conditions of a still difficult local economic environment for many local companies, BCR wants to build up a sound relationship with its clients based on the help it is prepared to give in such moments. The steel production is an important drive of the economy, both due to its contribution to exports, and to the new jobs, energy and raw materials consumption generated at the domestic level. Mechel Group is hiring over 7,500 people in 5 towns of  Romania and we believe it is BCR responsibility to support in this way the economic recovery, stated  Diana Hudymač - Executive Director of Group Large Corporate Division within BCR.

''The expansion of our relationship with Erste Group is based on the positive experience between Erste Group and Mechel's Romanian production facilities, as well as on the solid corporate relationship we have. We already have a solid base for further cooperation. The new increased facility, in the current market conditions, testifies to our longstanding relationship and is a sign of trust that Erste Group shows to Mechel Group'' stated Yury Gushchin, general manager for Mechel East European Metallurgical Division

Mechel is one of the leading Russian companies; its business includes four segments: mining, steel, ferroalloy and power. Mechel unites producers of coal, iron ore concentrate, nickel, steel, ferrochrome, ferrosilicon, rolled products, hardware, heat and electric power. The holding has been present in Romania since 2002 through 6 metallurgical units: Mechel Targoviste, Mechel Reparatii, Mechel Campia Turzii, Ductil Steel Buzau, Ductil Steel Otelu Rosu and Laminorul Braila. Mechel's products are sold in Romania and abroad. Key destinations for export are Czech Republic, Hungary, Germany, Italy, Poland, Turkey as well as neighbour countries such as Serbia and Bulgaria.

Overall industrial production in Romania (manufacturing, extraction and utilities) is forecast to rise by 7.5% in 2011 and expand by 6.3% in 2012, significantly above the world industrial production of 4.9% in 2011 and rise of 5.0% in 2012. Over the next 10 years industrial production in Romania is expected to grow on average by 5.7% a year, compared with a growth rate of 4.3% a year worldwide.# Romania's GDP is expected to rise by 1.4% in 2011 and expand by 1.9% in 2012.


Erste Group is one of the main suppliers of financial services in Central and Eastern Europe. More than 50,000 employees servicing over 17 million clients in 3,200 branches located in 8 countries (Austria, Czech Republic, Slovakia, Romania, Hungary, Croatia, Serbia and Ukraine). As of 30 September 2011 Erste Group has reached EUR 216.1 billion in total assets, an operating income of EUR 5,523.5 million and a cost-income-ratio of 52.4%.


Banca Comerciala Romana (BCR), member of Erste Group, is the most important financial group of Romania, including the operations of universal bank (retail, corporate & investment banking, treasury and capital markets) as well as the specialized companies on the leasing, assets management, private pensions, housing and mobile banking markets. BCR is the No.1 bank in Romania according to assets value (over EUR 16 billion), No. 1 bank by its clients number and No. 1 bank by saving and lending segments. BCR is the most valuable financial brand of Romania according to client's trust rate and the number of those for which BCR is the main institution they are banking with.

SC TMK ARTROM SA and BCR signed worth over 45 million EUR credit facilities

TMK ARTROM SA, part of European Division of TMK, one of the world's leading oil and gas steel pipe suppliers, signed 5 year EUR 20 million loan agreement with Banca Comerciala Romana, member of Erste Group Bank AG.

The term loan of EUR 20 million is secured with Corporate Guarantee issued by mother company OAO TMK and is aimed at improving the current debt structure of SC TMK ARTROM SA in line with strategic restructuring of credit portfolio.

BCR has also increased the existing facilities available for SC TMK ARTROM SA: the overdraft facility from EUR 18.4 million to EUR 20 million, up to 3 years tenor, and the discounting line for promissory notes from RON 5 million to RON 10 million, 1 year tenor.

In addition to the above, BCR provided a new treasury line of EUR 3 million, 3 years tenor, for the purposes of interest rate and FX risk hedging.

"We have a long-term cooperation with BCR. In 2005 we received a four year investment loan of 23.7 million Euro aimed at construction and launching the modern pipe hot-rolling mill in TMK ARTROM. Thus we have strengthened our positions in the European market and almost doubled our production capacities. With these new facilities we continue our long-term cooperation with the bank bringing it to the new strategic level”, said Adrian Popescu, CEO of TMK European Division.

 Reff and Associates, Fatrom's legal advisor in the sale to DSM Nutritional Products Romania

The combined value of M&A deals advised by the law firm this year amount to 300 million Euro.

 Reff & Associates, the correspondent law firm of Deloitte Romania, advised Fatrom in the sale to DSM Nutritional Products, thus consolidating its M&A portfolio that has reached a combined value of 300 million Euro this year.

DSM Nutritional Products, one of the world's leading supplier of medicine to the feed, food, pharmaceutical and personal care industries, has recently bought SC Fatrom Aditivi Furajeri SRL, a local leader in production and distribution of feed additive. Worth 7 million Euro, the sale reshapes the market at a moment when agriculture and related sectors are going up the list of development priorities for the Romanian state and the business environment.

The "business transfer"-type of deal consisted in the sale - purchase of the Fatrom business (with assets, equipments, etc.), namely the production line Ștefanestii de Jos, the clients' portfolio, part of Fatrom's employees, as well as the production equipment and utilities.

"Looking back to the 10 years that have almost gone by since we set up Fatrom, I am glad to say that we had a professional team besides us, that has put sustained efforts into developing and maintaining the company at the top of an ever more competitive market," said Andrei Soare, former administrator and one of Fatrom's founders. "From this point of view, the sale comes at the right moment. The experience and reputation we have built up, alongside the service quality and skilled staff will prove important assets to the new owner and its future strategy locally and internationally."

The deal was extremely complex, as Fatrom's activity is subject to special regulations and it thus required interaction with various regulatory authorities. Moreover, the transaction was difficult overall, as it involved balancing the interests of both parties, and negotiations on commercial and legal aspects lasted almost two and a half years.

Reff & Associates provided legal advice to Fatrom throughout this entire process. The team - led by Leontin Trifa, Associate Partner, and including seniors Silvia Axinescu and Diana Radoi - was involved in drafting, reviewing and negotiating all documents for the client, carrying out formalities and procedures linked to transfer of approvals required for company operations, as well as activities linked to implementing the transfer of employees.

"Fatrom's takeover was a complex process, a challenge and a great satisfaction at the same time for the team I coordinated," said Leontin Trifa. "There was great teamwork between the two parties involved and this was a critical factor to the success of the project."

"I don't believe that 2011 will be a growth year for the M&A market, considering that the distress deals area lacks dynamics, and investors are still cautious. Despite all that, our team has constantly been involved in major deals, including office building sales, joint ventures for commercial centers development, sales of stakes in production activities, acquisitions in the packaging business," Deloitte Tax & Legal Partner in Charge Alexandru Reff, added.

About Reff & Associates

Reff & Associates is the correspondent law firm of Deloitte Romania, integrated with the Deloitte multi-disciplinary advisory practice and affiliated to a network of law firms and legal departments working with Deloitte all over the world. The professionals working with Reff & Associates have significant experience in high level transactions, in which complex matters are addressed from cross-border and multi-disciplinary perspective. The multi-disciplinary experience of legal professionals allows them to provide, together with other Deloitte professionals, a complete answer to the needs of their clients. They propose state-of-the-art services relying not only on legal and regulatory expertise but also on the use of innovative processes. Their global and systematic approach allows clients to integrate early in their strategy potential legal issues, thus anticipating and preventing legal risks and minimizing the disruption of business operations.

International recognition:

The continuous and consistent involvement of Reff & Associates in landmark transactions over the last years has increased the firm's visibility and market recognition and has prompted higher rankings in reputable international legal guides. The 2010 edition of Legal 500 Europe, Middle East & Africa ranks Reff & Associates alongside leading law firms, and particularly recommends its lawyers for their expertise in Banking & Finance, Corporate and M&A and Real Estate work. As quoted in the said Legal 500 edition, the clients appreciate Reff & Associates for the "excellent technical advice" and "ability to handle complex work to tight deadlines". Reff & Associates was also recommended by the legal guide Chambers Europe 2011 for its M&A practice.

Awards and nominations Reff &Associates:

    Award for the most important real estate transaction of the year 2010 - Ziarul Financiar, Lawyers' Gala Awards, 2011
    Nomination for the most important banking transaction of the year 2010 - Ziarul Financiar, Lawyers' Gala Awards, 2011
    Award for the law firm of the year 2010 in real estate - Avocatnet, Avocatnet.ro Gala | 10 years, 2011
    Award for the most important transaction of the year 2010 - Avocatnet, Avocatnet.ro Gala | 10 years, 2011
    Award for the most important real estate transaction of the year 2009 - Ziarul Financiar, Lawyers' Gala Awards, 2010
    Award for the most important real estate transaction of the year 2009 - Finmedia, Top Lawyers' Gala, 2010

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