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The last twelve months have seen minimal improvement in the Slovak Republic. "The trend is still restructuring and refinancings," one partner says....

The last twelve months have seen minimal improvement in the Slovak Republic. "The trend is still restructuring and refinancings," one partner says. To unpack a particular tendency, it is important to note that in Slovakia, informal workouts take precedence over any organised approach. "It's more bilateral waivers or changes," one partner says, adding: "In Slovak law there is no coordinated outside court solutions [it works as] informal restructurings and amendments. On the other side here [in court], restructuring is formalised."

Despite dominant trends continuing, it is important to note that the market has not been static and slight moves have been detected in a number of pertinent areas. "New financing is slowly picking up. With some new loans and new investments it is picking up," one partner says. In particular, acquisition finance, a class of finance that is traditionally difficult to come by in Slovakia, has shown an upturn. "Acquisition finance is from investors abroad. It is something partially driven by the local market as banks have no appetite for large loans, it pushes investors to finance [from] outside. Liquidity is not a big deal. Most banks have a parent company with problems outside the country and it influences the attitude to lending on this market," one partner says. Nevertheless, banks are still highly cautious and evaluate prospective projects in great detail before commitment. In fact, at the start of the year, similar to the Czech Republic, the banks interest was directed towards solar financing. However, on both the scale of the financings and concomitant tariff problems, the Slovak Republic was merely a microcosm as "renewables legislation was amended with no new projects and subsidies cancelled", according to one partner.

There has definitely been new money movement in the real estate sector but it is difficult to gauge just how significant this shift is. "It's a slow market on real estate. It started in the second half of last year with the finance of a shopping mall which died off. Several retail projects in the pipeline re-launched after being on ice during the crisis. In real estate, generally on financing, banks provide corporate financing in simple forms," one partner says. Another partner notes: "It's an interesting year, in new money deals, especially in the real estate sector. Definitely, major real estate developers sense the wind is turning and refresh temporarily abandoned projects, [there is] new money work from last summer it's constantly increasing but has not reached the level of pre-crisis, but it's positive".

With regard to highway infrastructure, the Slovak Republic has experimented with the PPP (public-private partnership) model. Under the previous government, three PPP projects started in 2008 and work still continues on completing a 50km plus section of the R1 between Nitra and Banská Bytrica. The other two (completion of the D1 motorway, connecting Bratislava and Kosice) were cancelled by the new Slovak government in 2011. The purchase of these works is presently undergoing the traditional public sector procurement process and the cost of the motorway development is expected to be met from the state budget and EU funds. Looking ahead, the Slovak government plans to employ the PPP model as an auxiliary method for motorway financing, especially for the completion of the D4 motorway (Bratislava bypass and the R7 highway between Bratislava and Samorín). To complete these projects, the government has even considered using a demand-based model. The construction is likely to start in 2014. "There were scandals, with some PPP projects being investigated. Huge funds [were involved]. The government is careful," one partner says.

The capital markets have been extremely quiet. With little equity activity to speak of, the debt capital market has only seen movement with regard to sovereign bond issues. "The government is very active on these markets," one partner says, with another adding: "Historically, it is extremely underdeveloped. There is no culture of raising money via private enterprises. The only interesting deals are those where a public entity acts as an issuer, the Slovak Republic raises money on the local market or through cross-border issues".

The Slovak Republic has not witnessed, in the last twelve months, a surge in M&A activity. Nevertheless, the market has not been lifeless, but deal flow occupies a space on the slower side of steady....

The Slovak Republic has not witnessed, in the last twelve months, a surge in M&A activity. Nevertheless, the market has not been lifeless, but deal flow occupies a space on the slower side of steady. "The big deals haven't really come to the market and there's not much going on, but it's better than two or three years ago when everything dried up," one partner says. Nevertheless, optimism reigns when lawyers direct their attention to the deal pipeline.

Many are optimistic about the government's plans for further privatisation in the near future. "They have decided that state owned companies [are] to be privatised...the wave of privatisation will start in spring, maybe soon, or fall. Maybe next year it will be the big topic," one partner says. Slovakia's new (centre right) premier Iveta Radicova's privatisation package announced the denationalisation of six state-run heating utilities and the potential admission of a strategic business partner into Rail Cargo and Bratislava Airport. "Heating plants in six of the largest cities will be sold later this year. The expected volume will be between €150-200 million, privatisation of the Airport is [also] being prepared but this is not for sale but a long-term lease. Railway cargo companies is also intended to be privatised. We'll hit the magical €50 million threshold which is large on this market," one partner says. There has also been talk of the potential float of Slovak Telekom on the stock market.

In the last year, Slovakia's GDP growth was 4.7% and it is one of the fastest growing in Europe. However, M&A activity has not reflected this. Nevertheless, market players were reluctant to sell before and this is one tendency that has shifted as foreign investor's interest is on the up, as one partner describes: "The new investors; they are from Germany, United States, Russia, Austria, Italy [and] they are attracted to the automotive and chemical industry".

Private equity has also been a topic of great interest to commentators. "Private equity funds are looking at the market," one partner says, adding: "Private equity is coming back strongly". "They [private equity funds] are all very active but in a small economy, opportunities to invest are limited...there is money under pressure from their investors to invest, otherwise they're just sitting [on it]," another partner says.

The renewable energy sector was affected with movement in solar-based projects. However, Slovakia's experience was not as dramatic as the Czech Republic. "In Slovakia, the story was better [than Czech] because the government limited the amount of projects. But, the feed in tariff changed recently so it's not as profitable as the previous one," says one partner.

Finally, there have been reports of some consolidation in the banking sector, in real estate and construction. "Bigger players are buying smaller players," one partner said.