IFLR 1000
The Guide to the World's Leading Financial Law Firms

In 2011, a new constitution in Hungary was passed. The Magyarország Alaptörvénye (Fundamental Law of Hungary), which comes into force on January 1 2012, undoubtedly carries symbolic importance as it marks a break from the communist past being adopted as it was by democratic process.

However, the new constitution also carries practical import, It is fiscally conservative; the Constitutional Court's powers on budget and tax matters will be restricted until public debt falls below 50% of GDP. The President will be allowed to dissolve Parliament if a budget is not approved and only companies with transparent activities and ownership structures are allowed to bid for government contracts. Moreover, the powers of the head of the National Bank are also limited. Additionally, the modification of tax and pension laws will require a two-thirds majority.

"The constitution is not directly affecting business," says one partner, "there are some new laws but the theory is most important. It's more of a political document introducing new concepts with intent to deviate from the socialist past." The partner adds that "it will strengthen the economy by allowing it to develop and reduce the foreign deficit. I think it's on the right track... and the tax cuts are a very important thing they did".

Hungary is undergoing a transitional phase and picking up the pieces after the catastrophic economic situation that required an International Monetary Fund (IMF) bailout in October 2008. "We see a substantial pickup in business which means we're busy and it's a good sign with more transactional work and investors are coming back.... we're slowly coming out of the crisis," says one commentator.

Banks lost their traditional market when the real estate sector was landed a big blow by the lack of new credit and the economic recession. Nevertheless, while 2006 and 2007 saw significant lending from commercial banks, there has been improvement as compared to the intervening period. In the last 12 months, there has been activity despite larger projects being put on hold. Lawyers note that they have had success in closing deals and that the interest towards Hungary is improving with money gradually starting to flow in. "The market is improving, banks are more willing to lend and the sentiment is better," says one partner.

Retail banking has had its own fair share of disruption and the source of the problem lay with the Swiss franc. During the inflation of the housing bubble, ordinary Hungarians preferred to take out foreign currency loans as interest rates were significantly lower than domestic rates, which became more expensive when the national currency, the forint, floundered in the last year. Most home credit was in foreign currency and consumers thronged to the banks as interest rates were the lowest in Swiss francs. When the crisis hit it inevitably led to rising debt payments. "Instalments grew by 50%," says one partner, with another adding: "The government tried to tackle the issue and established a decree to fix the exchange rate to protect the population...there will not be many new home credits as the conditions for new credit are stringent and very cautious".

Capital markets transactions are happening in greater numbers than before. However, they are still not at pre-crisis levels. Bearing the above in mind, it has become apparent that bond issues and private placements are offering viable alternatives to straight up commercial financing. "There is more appetite and more willingness to go ahead as it's faster and easier because the covenants are less severe than facility agreements," says one partner, adding: "Capital market deals are quite a few. We are doing several on the equity and debt side".

According to another partner: "Bond issues are quite healthy but the question is what segment we are talking about? If it's bond issues by big corporations that's fine, but municipality bond issues are more and more problematic. It's a bit over financed."

With regard to the equity capital markets (ECM), IPOs are rare. "Most transactions we do are debt securities or capital increases," says one partner. Nevertheless, the Warsaw Stock Exchange is rapidly developing into the regional hub for ECM transactions which in turn is driving work. "It's emerging as an in between [Eastern and Western Europe]," says one partner, adding: "the market is developing equity tickets that wouldn't go public [in Hungary]."

There is little doubt from market commentators that Allen & Overy is rightly placed in tier one. The firm is duly noted for the strength of its capital markets practice and its banking practice continues to excel, having, in 2010, acted in most syndicated loans.

"They're big market players with a real strength in English [law]. They have good Anglo-Saxon contacts," says one competitor. Zoltán Lengyel is praised by peers for his expertise in "the special territory of derivatives transactions" and in 2010 the firm's banking practice was bolstered by the hiring of Károly Fóti as counsel from White & Case.

Clients consistently view the firm as one of the best and show appreciation for its network. "A&O has offices in most of the major cities and [their] market is expanding," says one client. However, there are mixed experiences: "A detailed analysis should have been done," says one client of a recent transaction, "they did it too quickly and unfortunately it needed more time... [but] every firm can make small mistakes".

The firm acted on the largest loan for a Hungarian borrower in some years. This was a cross-border syndicated financing for BorsodChem as part of a restructuring process, which resulted in Wanhua Industrial Group acquiring the shares of BorsodChem.

In the equity capital markets, the firm acted for a Hungarian corporate with regards to a potential listing of shares on the Budapest Stock Exchange.

The Allen & Overy team has developed quite a reputation for Eurobond issues and in 2011 was assisting a leading financial institution with its forthcoming issue. The firm also acted for MOL on its issue of €750 million 5.875% Eurobonds due in 2017 and for the managers in connection with OTP Bank's first ever issue of CHF-denominated notes under its €5 billion EMTN programme.

The firm is also advising numerous international banks and investment firms (including Barclays Capital, BNP Paribas, Crédit Agricole, Nomura International and Société Générale) with regards to its entry into derivatives and repo transactions with Hungarian regulated entities.

Described as the "golden standard" by a rival, Andrékó Kinstellar breaks into the top tier this year. There is common agreement among market commentators that the firm has been very visible. "Kinstellar are very strong in capital markets," says one partner.

Clients have been pleased with the service, as one says: "The experience was good. They made quality documents and did it on time. The legal advice was valuable". The firm is also seen as good value for money. "They're good value, since Kinstellar are not as expensive as Linklaters was [Kinstellar was formed by a group of ex-Linklaters partners]," says one client.

Csilla Andrékó is very active on the firm's deals and has been drawn out for much praise by her peers. "Csilla was a partner at Linklaters. She has tremendous experience and is very well respected," says one peer, adding that "she should be singled out".

The firm assisted MOL in the setting up of its very first Hungarian law governed domestic bond programme for €370 million last year and acted on the first bond issuance under the programme. It is so far the only one of its kind in Hungary and marked the first non-bank domestic bond programme for several years.

Elsewhere, the firm helped E-Star establish a €40 million domestic bond programme. The deal also involved due diligence and refinancing aspects.

CMS Cameron McKenna certainly has the human resources for the big-ticket mandates. With eleven lawyers working solely on banking transactions, the firm has the largest dedicated banking and finance team in Hungary. "They're the biggest on the market," says one partner.

CMS Cameron McKenna's notable CEE (Central & Eastern Europe) network impressed clients, who give consistently positive feedback. "They're very professional and I'm very happy with the service," says one client.

While the firm is well known for its banking practice, there is feeling that its capital markets practice is not as strong. "It's important to mention that CMS's capital markets [team] is small, they're stronger in banking," says one partner. However, another partner points out that "CMS had a sizeable bond deal recently".

The firm advised Erste Bank on its voluntary public offer and squeeze out and then its conversion into a private form, and in a separate deal, advised on establishing a home savings and loan bank for the same client. These deals were unique on the Hungarian market. Furthermore, the firm advised Day One Capital in the establishment of a venture capital investment fund outside the framework of the Jeremie program.

CMS advised Crédit Agricole Corporate and Investment Bank as arranger on a €37 million private bond issue for MÁV Magyar Államvasutak and subsequently advised the same client as arranger and underwriter on a €26 million private bond issue for Magyar Posta. The firm also has a very active aviation finance practice

Market commentators have noted the recent promotion of Iván Seferto to partner of CMS's banking and international finance.

Siegler Law Office/Weil Gotshal Manges is highly visible on the market. "We see Weil a lot on the other side," says one partner. Clients have expressed their satisfaction for the firm, with one commenting: "I highly respect Weil Gotshal, they have an extremely wide CEE (Central & Eastern Europe) network."

According to another client: "They were innovative in finding out new solutions in compliance with the legislation. They had depth of knowledge and I think the communication was perfect." Some peers believe the firm is stronger in capital markets than banking and according to one: "Weil doesn't advise too much on the finance side. They're strong in debt finance but banking is not as strong." However, the firm's recent mandates challenge this view.

On the banking side, in 2011 the firm was involved in a very high profile and high value on-going and confidential deal that could rank as the largest transaction of 2011. Elsewhere, the firm was advising Darby Private Equity and Avenue Capital on the €47 million restructuring of FiberNet, a Central European cable TV and internet provider.

The firm really comes to the forefront though in the capital markets. Konrád Siegler has been very active this year and is regarded as one of Hungary's key lawyers in capital markets. In 2010 Siegler led a team advising UniCredit on the Hungarian law aspects of a put and call option arrangement regarding the €250 million 2.78% treasury shares owned by MOL. The firm also advised OTP Bank and K&H Bank as lead arrangers in connection with MOL's establishing of a €377 million domestic bond program. In mid-2011, the company was preparing for a listing of first issuance under the programme either on the Budapest Stock Exchange or on other regulated markets.

Looking ahead, Kajtár Takács Hegymegi-Barakonyi Baker & McKenzie will be pushing to reclaim its position in tier one. Previously, the firm had been hit by departures, but after recently hiring well known and respected local partner Dusán Lásztity, it is gradually moving out of the transitional phase forced by the aforesaid departures. Moreover, this year, the firm has attracted some high profile mandates. "I have good experience with Baker & McKenzie," says one client.

The firm was involved in what has been touted as the deal of the year, advising the Bank of China in regulatory aspects of the €900 million cross-border financing of the acquisition of BorsodChem by Wanhua Industrial Group . It was the first time that such a significant amount of Chinese capital had been invested into a CEE (Central & Eastern Europe) country. The firm's substantial cross-border financing experience was demonstrated again by its involvement in the biggest restructuring deal in Hungary for the OTP Group. The firm represented OTP Bank and CKB (Crnogorska Komercijalna Banka) in relation to the restructuring of the financing of Vektra Group.

Another highlight for the firm was when it represented and advised OTP Bank together with MKB Bank on the complex €54 million restructuring of the two office buildings (7AB) built in the Millennium City Centre by Duna Business Hotel and DunaTermál Hotel.

Réczicza White & Case is a solid leading firm. When it comes to its visibility in the market peers consistently refer to it as one of "the usual suspects". Clients also hold a good deal of respect for the firm, with one describing it as among the "market leaders".

The banking and finance practice, led by Gergely Horváth, is one of the market's biggest. The core team of nine locally qualified finance lawyers work closely with the capital markets group, led by Edward Keller, who has in the past few years been regularly advising Invitelin on several landmark deals. Among the deals was the first floating rate note offering involving Hungarian credit and the first pik note (pay-in-kind note) offering in the CEE (Central & Eastern Europe) region.

Alongisde its Moscow office, the firm also advised a consortium of Hungarian banks consisting of K&H Bank, UniCredit and Export-Import Bank with regard to an €87 million export financing to Hungarian exporter Proinvest and Russian obligor Vologda Region municipality.

Additionally, the firm was acting for the European Investment Bank (EIB) in relation to a €50 million risk sharing facility provided to CIB Bank for the financing of small and medium enterprises and small scale projects in Hungary and with its London office was also involved in the €80 million refinancing of Invitel Holding's first high-yield bond issue (issued in 2004), which was also one of the first high yield bond issues from Hungary.

Faludi Wolf Theiss has had a successful year and has been especially active in banking.

Driven by Zoltán Faludi and Gábor Erdös, the firm advised a consortium of banks including UniCredit Bank (as arranger, agent and lender) with regard to the €46 million financing of the operation of Waberer Holding, a leading logistics service provider.

This year, Gide Loyrette Nouel (GLN) has boosted its team with the recruitment of Gábor Felsen and experienced lawyer György Katona from Lakatos Köves & Partners . The firm has also been hit by the departure of partner and former head of banking and finance Balázs Ferenczy. Although the firm is especially well placed to advise French-speaking clients the new arrivals signal a commitment to extending its practice in all directions.

Indeed, the Budapest office has modelled itself as GLN's regional hub, and it recently advised Société Générale together with GLN Paris, London and Maric-Malisic-Dostanic (former GLN Belgrade) with regard to a €293 million loan agreement with the Republic of Serbia, and guaranteed by the International Bank for Reconstruction and Development.

Lakatos Köves & Partners drops a tier this year. The firm is generating some heated discussion as it surfaces after Clifford Chance, its former parent firm, exited the market. It still maintains a close and beneficial relationship with the magic circle firm. In other recent changes, the team saw partner and head of banking Gábor Felsen leave and promoted Péter Köves to management.

Despite challengesthe firm is pleasing clients, with one describing it as "innovative with pronounced knowledge" and another describing its communication as "really by the book". It recently advised the underwriters, Deutsche Bank Securities, BNP Paribas and Citigroup Global Markets, with regard to the Republic of Hungary's €2 billion 6.375 per cent notes due in March 2021 and €530 million 7.625 per cent notes due in March 2041.

Partos & Noblet in cooperation with Hogan Lovells is making steady progress especially in the fields of restructuring and in financing work. . Most of the work of the firm has involved advising international groups in respect of investments in Hungary or dealing with Hungarian elements of multijurisdictional cross border transactions.

This year, the firm advised Camoplast on the Hungarian aspects of its loan from Société Générale and on the restructuring of certain Hungarian securities.

Bpv Jádi Németh is involved in some interesting matters. At €2 million, in a law suit initiated by alleged holocaust victims, the firm represented MKB Bank in front of the Hungarian courts and other authorities. Although taking place in the USA, there are various procedural issues that engage Hungarian law. Following the move of Zoltán Martonyi and Alexandra Papp from the Budapest office of Baker & McKenzie to establish Martonyi Law Firm in cooperation with Bolton May, ,the pair has retained the entirety of its capital markets clientele and succeeded to participate in transactions involving new clients in a difficult financing environment.

Clients are highly satisfied by the young firm and one has described its work as "very practical, quick, thorough and business minded".

The firm is developing a reputation for international capital markets advisory services and advised OTP Bank in respect of the 2010 annual update of its €5 billion EMTN Programme.