On January 11, 2018, CEE Legal Matters reported that Dentons advised the London branch of UniCredit Bank AG and MUFG as coordinators on a EUR 750 million revolving credit facility provided by a group of 13 banks to MOL Plc, the Hungarian multinational oil and gas company. CMS advised MOL on the deal, which represented the largest financing deal in Hungary in 2017.
We reached out to both firms for more information.
The Players:
• Counsel for the Lenders: Gergely Horvath, Partner, Dentons Budapest
• Counsel for MOL Plc: Erika Papp, Partner, CMS Budapest
CEELM: Gergely, how were you and Dentons selected initially by UniCredit Bank and MUFG?
G.H.: Our Hungarian team (currently at Dentons, formerly at White & Case) has been a trusted legal advisor of the MOL group for over a decade, advising the company or its financing banks (including UniCredit Bank and MUFG) on a number of such transactions several times since 2005. With excellent support from Dentons’ London office, the excellent relation has been maintained and strengthened in recent years.
For this matter, we were selected in a competitive procurement process at the beginning of Q4 2017.
CEELM: Erika, how about you? How did you and CMS become involved in this matter?
E.P.: In the Hungarian market we believe it is very prestigious to work for MOL, especially on their financing matters, so we were keen to get involved with their financing projects. Eventually our work paid off and last year we were appointed for the first time and this year the second time. It was a great acknowledgement of our work on the first transaction that MOL came back to us and selected CMS for another project too. They involved us very early – i.e., not just in the documentation phase, but even in the term sheet phase, which MOL always negotiates bilaterally.
CEELM: At what stage in the process were you each brought on board and what exactly was your mandates when you were retained?
G.H.: We were engaged by the banks once the term sheet was principally agreed. We assisted the banks during the negotiations with MOL and their legal counsel and in the course of signing of the facility agreement.
E.P.: We were asked to assist MOL on the term sheet, which is, as I mentioned, not the documentation phase but the bilateral negotiation phase. This is especially interesting for lawyers because you can see the dynamics of the negotiation between MOL and its financing banks. We assisted MOL in putting the main terms of the commercial deal in place before we started to draft the finance documents.
CEELM: Who were the members of your teams and what were their individual responsibilities?
G.H.: I, being the relationship partner for both MOL and UniCredit, led the transaction from Budapest and coordinated the Hungarian legal aspects of the financing, and I was the main point of contact at Dentons for our clients. As the governing law was English, our local team was supported by a senior legal team from our London office, led by Partner Lee Federman, who has been involved in multiple financings for the MOL Group in past years and is intimately familiar with recent developments in the international markets and the LMA standards.
E.P.: Our English law legal advisor was Simon Dayes, an English-law qualified partner in Bucharest.
I assisted MOL in generally coordinating the deal, looking at Hungarian legal aspects and keeping contact with MOL since I am based in Budapest and I have a longstanding relationship with the MOL treasury team.
CEELM: How was the transaction structured and how did you each help it get there?
G.H.: The new facility was arranged as a club deal with a group of MOL’s relationship banks. It has a tenor of five years (with two one-year extension options) and can be drawn in both euros and US dollars. This new Agreement replaces the EUR 561 million tranche of the original EUR 1 billion 2011 revolving credit facility, on which we also advised the banks.
As the current Facility Agreement and related documents were based on the existing benchmark documentation of a revolving credit facility agreement dated from 2016 our work was less substantial as compared to other financing transactions where we have to start from scratch.
E.P.: MOL transactions are usually very well prepared and there is not much to negotiate. MOL is in a strong position and they have long-standing relationships with their financing banks so the lawyers’ role is not very significant. Obviously on both sides there are lawyers – both the banks and MOL are always represented by international law firms – and they make sure that every detail is correct, but we do not have to play a very active role in these transactions in light of MOL’s strong position on the financial market.
CEELM: What would you describe as the most challenging or frustrating part of the process?
G.H.: As we were advising UniCredit Bank AG, London branch and MUFG as coordinators of the credit facility provided by a group of 13 international banks; the most challenging part of the matter was aligning the interests of all the banks involved in the transaction, along with time, as the transaction was completed within two months from kick-off.
E.P.: These deals always involve a very high value and because of that a lot of banks need to be involved in them. The typical syndicated loans of MOL are subscribed by over 10 banks – both Hungarian and foreign. The most challenging part of the process is to communicate with the two coordinating banks and MOL and to organize meetings in a way that allows everyone to participate and to ensure that all of the banks’ interests are aligned and harmonized.
CEELM: Was there any part of the process that was unusually or unexpectedly smooth?
G.H.: Since we have advised the MOL Group for over ten years regarding their financing we knew quite well what was expected from our side within the transaction. MOL has a very good in-house team and is always advised by top-tier lawyers so their transactions usually flow much smoother and close quicker than the market average.
E.P.: A finance transaction – especially syndicated financings – are long transactions with several participants. For this reason these deals usually take two, three, four, or sometimes even six months, just because of the sheer number of participants. But with MOL, they always make sure that their deals close really fast. On this particular deal I think there was not more than three or four weeks between kick-off and signing. It always requires an extraordinary amount of organization to achieve this short completion time. This was partly due to MOL’s treasury team and we would like to think that it was also partly due to the two law firms involved.
CEELM: Did the final result match your initial mandate or did it change somehow from what was initially anticipated?
G.H.: Our mandate did not change throughout the transaction, it stayed the way we agreed and signed our engagement letter.
E.P.: We think that the final result matched our original mandate because everything was on track. Everything happened very fast and smooth.
CEELM: Gergely, who at the banks directed you, and how would you describe your working relationship with them?
G.H.: On the banks’ side, the coordination was done primarily (and perfectly) by Richard Daniell (Director of Syndications, Debt Capital Markets – Loans and Bonds, Investment Banking Division for EMEA at MUFG) and Jana Petkova’s team at UniCredit London, including, inter alia, Peter Czajkowski, Ivana Kojic, and Paula Hryckowiak.
We have a longstanding working relationship with UniCredit, having advised them on many other matters in Hungary and CEE. We have had less experience in the past with the team of MUFG, but naturally I can only compliment them as well as they are very professional and well-prepared, as were all the other banks who were involved in the transaction. In these types of financing transactions we are primarily in contact with the in-house lawyers and the financing team of the banks who are all experts in their field.
CEELM: Erika, what individuals at MOL directed you and how would you describe your working relationship with them?
E.P.: Both the lawyers and the financing experts of MOL were involved in the deal and we got instructions from both the legal and the treasury teams. We know this team quite well and we like to work with them. Also it was very easy to have a good working and personal level relationship with them because they are good communicators – very much to the point and easy to work with. Apparently the oil and gas sector attracts women and these transactions was done by an all-women team. I could say that both Simon and I enjoyed working with them.
CEELM: How would you describe the working relationship with your counterparts on the deal?
G.H.: Erika and I are ranked amongst the few Band 1 individuals in Banking & Finance in Hungary according to a prominent guide. I’m always happy to work with Erika and her team at CMS, as she is a very clever and respected banking lawyer who I trust. Naturally we know and respect our colleagues at CMS, as this was not our first encounter across the table from them on a financing transaction.
E.P.: This is not the first MOL financing we have worked on with Dentons so we feel that we know each other quite well and know what to expect from each other. We have a good working relationship with this Dentons team.
CEELM: How would you describe the significance of the deal in Hungary?
G.H.: This was the largest financing deal in Hungary in 2017, and we are delighted to have advised UniCredit and MUFG on it. The new facility will serve to further enhance MOL’s financial profile and liquidity position.
The size of the deal shows that international banks have trust in the Hungarian market and these type of deals can also act as examples for other companies looking to finance their operation by international financial institutions.
E.P.: Syndicated financings of this type will occur only two or three times every year in Hungary. The deal size was 750 million euros, which is not a number that you often see on a finance document in Hungary. In the London market these deals happen every day. But in Hungary this is rare and therefore very prestigious to be involved in.
This Article was originally published in Issue 5.5 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
