Bulgaria—cross border banking and finance guide
Produced in partnership with Schoenherr
Bulgaria—cross border banking and finance guide

The following Banking & Finance practice note produced in partnership with Schoenherr provides comprehensive and up to date legal information covering:

  • Bulgaria—cross border banking and finance guide
  • Coronavirus (COVID-19): Existing financings/utilised debt
  • Does debt documentation in your jurisdiction typically foresee termination rights for the lender upon the occurrence of a crisis? If so, are eg customary material adverse effect (MAC) provisions enforceable in such instance?
  • Are there statutory rights to terminate a financing agreement in such instance?
  • Can the economic terms of a loan be changed unilaterally due to the occurrence of a crisis?
  • Is there a statutory moratorium of creditors' claims or a freeze in covenants (eg if a borrower's business is closed by the authorities due to a crisis)?
  • Are borrowers obliged to treat all creditor classes equally (eg with respect to interest payments etc) during a crisis?
  • Coronavirus (COVID-19): New financings/committed debt
  • Can a lender impose a draw-stop (ie refrain from making available funds under a committed facility, revolving credit line, overdraft or similar financing instrument) on the occurrence of a crisis?
  • Will contractual ‘no financial indebtedness’ or negative pledge undertakings apply in respect to rescue financing provided by governmental or public funds made available for crisis prevention?
  • More...

Bulgaria—cross border banking and finance guide

Coronavirus (COVID-19): Existing financings/utilised debt

Does debt documentation in your jurisdiction typically foresee termination rights for the lender upon the occurrence of a crisis? If so, are eg customary material adverse effect (MAC) provisions enforceable in such instance?

Yes, not only ‘LMA style’ loan documentation but also usual ‘in-house’ loan agreements typically contain material adverse change provisions (MAC) that entitle a lender to terminate an agreement and to cancel commitments. Similar clauses targeting deterioration of the condition of a borrower, borrower group or the value of the collateral granted are also contained in the general terms and conditions (GTC) of some Bulgarian banks.

However, the lender's rights under such MAC provisions are limited by law and such provisions could be invalidated in court if not objectively justified. In particular, MAC provisions cannot be enforced due to the occurrence of a crisis per se and their enforceability should be assessed on a case-by-case basis. A specific-case-based approach is usually applied requiring that the relevant forum considers, inter alia, the direct effect of the crisis to the borrower's position, contingency measures adopted by the borrower, and the degree of care exercised by the parties to the loan relationship.

No specific statutory ‘force majeure’ provisions exist and are typically not contractually foreseen that would entitle a borrower to prevent a MAC termination by a lender in

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