1. Bulgarian Leasing Market Developments and Prospects
A presentation by Teodor Marinov, Co-chairman of Bulgarian Association for Leasing

2. Historic background – stages, milestones
Until the Bulgarleasing era
start of transition to free market economy, establishment of the first private leasing companies
small car leasing companies gather momentum
banking sector crisis, lack of refinancing and numerous bankruptcies
first international players enter the market
rapid expansion phase starts
two leasing associations established
mass penetration by international banking groups starts
BNB commenced collecting and publishing leasing statistics
BAL established upon merger of the two leasing associations
Entry into the EU

3. Measuring market growth - specifics
BNB data available from 2005
Changes in sample
New business measured by financed amounts
BAL data:
Principles of surveys
Sample
The combined approach:
BNB data used for outstanding
BAL data used for volumes

4. Leasing market size, determined by outstanding net lease receivables at the end of the period (in EUR mln)
Source:
2001 – BAL data
2005 – BNB data, for 2005 and 2006 historic figures used

5. Leasing market size, determined by value of new business (in EUR mln)
Source: BAL

6. “New business” financial leasing
Asset type
Machinery and Industrial Equipment
Computers and Business Machines
Transport Vehicles
Cars
Real Estate
Other
Total
Value (EUR mln)
345 9
372
425 99 41
1293 %
26.72%
0.72%
28.79%
32.89%
7.68%
3.20%
100%
Source: BAL data

7. Share of machinery and industrial equipment in the part ”new business” - international comparison
Source: Data from market survey of Leaseurope for 2006

8. “New business” operating leasing
Asset type
Machinery and Industrial Equipment
Computers and Business Machines
Transport Vehicles
Cars
Real Estate
Other
Total
Value (EUR mln)
0.92
0.02
6.85
10.26
18.05 %
5.08%
0.11%
37.97%
56.84% 0%
100%
Source: BAL data

9. BULGARIA Leasing penetration ratio
Source: BAL for New bisuness, NSI for Investments

10. Ratio of leasing penetration- international comparison
Sources: Data from market survey of Leaseurope for 2006, country statistics

11. BULGARIA Ratio of net lease receivables to GDP
Source: BAL for New bisuness, NSI for GDP

12. Ratio of net lease receivables to GDP International comparison
Sources: Data from market survey of Leaseurope for 2006

13. Legal Framework for leasing
No special leasing law. Main laws defining leasing activity are: Commercial Code, Law on Contracts, Accounting Law
Leasing companies are not protected by Law from supplier default
No restrictions on tenor, type of asset and amount
Contracts are registered with Central Pledge Registry. Registration is a base for issuance of repossession writ of execution through out-of-court procedure. There is mixed experience in using of this procedure
A certain practice among lessors is the notary endorsement of lease contracts. Such endorsement is used for obtaining of writ of execution for collection of the overdue amounts under out-of-court procedure. Unfortunately, experience in applying of such procedure is mixed
While overall legal framework is adequate, there is much room for improvement in implementation

14. ACCOUNTING AND TAX ADVANTAGES OF FINANCIAL LEASES
NONE

15. Accounting and profit taxation for leasing
Taxation of financial and operating leases is based on accounting profits
Companies may choose reporting standard between National Accounting Standards (NAS) and IFRS
NAS converge towards IFRS (economic treatment of leasing transactions)

16. VAT taxation for leasing in Bulgaria
Bulgaria introduced VAT in 1994
VAT Law changed dramatically in 2007, reflecting EC’s 6th directive
The General rate of 20% applies to capital payments under financial leases and rentals under operating leases
Lessor may choose whether to charge VAT on interest;
Right to VAT refund to lessees is allowed under the same criteria as if they were to acquire the asset
There is special VAT refund regime for cars, depending on number of seats
VAT is due upon delivery (close-end leases) or at installment (open-end leases)
VAT refund period grew substantially upon EU accession

17. Bulgarian leasing market: Challenges ahead
Macroeconomic impacts
Country risk and cost of funds – implication of the sub-prime lending crisis
Liquidity impact – limited on banking groups, stronger on captives and severe on independents
Eligibility for EU funded projects:
Regional Competitiveness and Employment
Program for development of the rural areas
BASEL II – impact at Group level, implications on re-financing
Maturing (?)

18. Country risk - measurement
Source: Reuteurs

19. THANK YOU!