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Deal 5: TBI Bank SVP Lukas Tursa on Tier 2 Bond Issuance

Bulgaria
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On December 22, 2021, CEE Legal Matters reported that Tsvetkova Bebov & Partners had advised TBI Bank on "the first-ever regulatory T2 bond issuance on the Bulgarian public capital markets. CEEIHM spoke with TBI Bank Senior Vice President Lukas Tursa to learn more about the issuance.

CEEIHM: To start, tell us a few words about TBI Bank and its operations

Tursa: TBI Bank is a Southeast Europe Challenger Bank and BNPL leader in the region focusing on consumers, merchants, and SMEs by providing financing and additional embedded services through a wide network of physical channels and platforms. We operate in Bulgaria, Romania, Greece, Germany, and Lithuania. Through various digital channels, and our network of 300 physical locations and 14,000+ small and large merchants and retailers, our customer portfolio consisted of almost 2 million clients in 2021. Our customer-focused approach resulted in our becoming one of Southeast Europe’s most profitable and efficient banks. 

CEEIHM: As reported by CEE Legal Matters, TBI Bank issued the first-ever regulatory T2 bonds on the Bulgarian public capital markets. What does a T2 status entail specifically?

Tursa: The term Tier 2 capital refers to one of the components of a bank's required reserves. Tier 2 is designated as the second or supplementary layer of a bank's capital and is composed of items such as revaluation reserves, hybrid instruments, and subordinated term debt. In our case, we issued a subordinated bond, which is currently trading at the Bulgarian Stock Exchange. We mainly targeted institutional investors including insurance and asset management companies, banks, as well as some high-net-worth individuals and other professional investors.

CEEIHM: What were the main challenges from a legal perspective to concluding this novelty?

Tursa: The main challenge was that there weren’t local examples of such deals. TBI is the first bank to issue publicly placed Tier 2 bonds on the Bulgarian market. In essence, we set a benchmark that could be followed by other banks. To do that, however, we needed to do things right and comply with all relevant legislation. We needed the approval of two independent regulatory bodies – the Bulgarian National Bank and the Financial Supervision Commission, both focusing on different requirements for the bonds being recognized as Tier 2.  Additionally, while we were preparing the deal, the EU introduced new requirements in terms of prospectus disclosure and particular risk factors. Doing all of this without having similar examples to fall back on was the biggest challenge but, in the end, everything happened smoothly and on time.

CEEIHM: What is the capital raised intended for?

Tursa: Our goal was to optimize the bank’s capital structure (previously it was only Tier 1 capital) and to support further business growth. We had never considered such bond raising as a funding source due to wider and cheaper alternatives available to the bank, such as deposits in the different markets where we operate.

CEEIHM: Why did you choose Tsvetkova, Bebov & Partners as your advisors on this issuance?

Tursa: We believe they are the best choice when it comes to debt raising deals and we wanted to take advantage of their excellent expertise. Our team was confident they were the right partner because of their successful track record. We had also worked with them on different projects in the past. They are the types of lawyers who not only provide the legal answers when it comes to legislation but also offer a solution and a course of action.

 

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