1. CEE – Corporate Debt Restructuring – Challenges and Opportunities Willibald Plesser, Co-Head CEE/CIS 4th CIS Local Counsel Forum Kiev, 26 June 2009 To insert other ready-formatted pages: go to the insert menu/slides from files/ select ‘on-screen inserts.ppt’ Click the display button, then click the button on the right (marked with red below). Click on the slide(s) to insert then insert and close.

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3. Our international restructuring and insolvency group  Leading international law firm with a multi-disciplinary practice:  excellence across the board and strength in key jurisdictions  The clear market leader in global restructuring and insolvency:  we have acted on most of the high profile restructurings in recent years  top tiers for restructuring and insolvency, corporate, employment, pensions and benefits and tax in leading legal directories (Legal 500, Chambers)  Significant European and Asian expertise on workouts and restructurings:  we are currently acting on the most high-profile restructurings in Europe. We were also extremely active in the last Asian financial crisis Legal Adviser of the Year Institute for Turnaround Awards 2008 Legal Adviser of the Year Institute for Turnaround Awards 2008 Banking and Restructuring Team of the Year Legal Business Awards 2008 Banking and Restructuring Team of the Year Legal Business Awards 2008 Banking and Restructuring Team of the Year The Lawyer Awards 2006 Banking and Restructuring Team of the Year The Lawyer Awards 2006 Restructuring Team and Deal of the Year (Eurotunnel) International Financial Law Review Awards 2007 Restructuring Team and Deal of the Year (Eurotunnel) International Financial Law Review Awards 2007

4. Past – a bit of history Present – the impact of the crisis Future – challenges & opportunities

5. 1989-2009  1989 – collapse of the iron curtain  “New” banking expands eastwards – Austria leads the charge

6. 1989-2009  1990s recession in CEE – new bank entrants hold strong  1998 – Russian crisis  2000 -  Stabilisation  EU-15 banks enter in large numbers  Three large Austrian banks dominate: Raiffeisen, Erste, Bank Austria  2002-2003  Move towards retail markets  2006-2007  Increasing sophistication of products

7. Past – a bit of history Present – the impact of the crisis Future – challenges & opportunities

8. GDP forecasts in % for 2009 – changed permanently over past few months

9. Key CEE dependencies  FDI  Exports

10. CEE – The Ugly - Europe’s sub-prime?  Economic situation in CEE has deteriorated rapidly over the past few months.  Risk exposure to CEE loans is concentrated (85%) in a small number of Western banks, from a handful of countries: Austria (70 % of GDP), Belgium, France, Germany, Italy, Sweden (30 % of GDP)  Write-downs  CEE banks started taking write-downs last year  Most losses in the form of indirect lending = via bank subsidiaries (roughly 60% of total losses in the case of Austrian banks)  Most of local lending by subsidiaries done in local currencies, but some banks have material fx exposure in the region (eg Raiffeisen 50% of UA loans in US$, significant portion of HU loans in CHF)

11. CEE – The Not So Ugly – CEE leverage modest compared to Western Europe Source: Raiffeisen

12. CEE – The Not So Ugly – Total CEE banking assets small compared to Western Europe Source: Raiffeisen

13. CEE – a diverse lot Group 1 (UA) Group 2 (RS, RO, RU, BG, HU, HR) Group 3 (PL, CZ, SK, SL) Source: Raiffeisen

14. Current legal / regulatory themes in CEE  Preparation for bad bank structures in the region  Regulatory harmonization /avoidance of discriminatory measures by local governments  Restructuring -related issues (enforceability, foreclosure, etc.), but focus is not on preservation as a going concern  Forced M&A in many manufacturing industry segments  Later: Market consolidation/ voluntary M&A in many areas (incl. banking)

15. Impact of crisis on CEE corporate sector  Worst problems for companies are:  reduced orders  worsening payment behaviour  financing difficulties

16. Corporate response to crisis  "Quick hit" measures dominate  Most strategic measures have been neglected so far – opportunities for us

17. Past – a bit of history Present – the impact of the crisis Future – challenges & opportunities

18. Challenges  Insolvency laws  focused on insolvency process itself, less on rehabilitation as a going- concern  means that banks are very keen to avoid insolvency at all costs  survival of distressed corporate entities is rare  often trade beyond the point of no return  Number of jurisdictions, differences in national regimes  Often many jurisdictions involved even for mid-market companies with cross- border operations  Despite harmonization with EU law, widely different insolvency regimes throughout the region  Cultural attitudes toward restructurings also differ from country to country

19. Overview of restructuring solutions Debt Sale Unwanted leverage to unsecured creditors Crystallises provision/loss Expensive, cumbersome and very public May require unanimity across all stakeholders Feasible? Equity prefer “new deals” – see it as a “lender problem” Need for committee (or unanimous) consensus Pre-packaged sale via administration/ receivership Reputational impact for bank? Very public, negative PR Existing headroom availability? Treating symptoms rather than the problem Some Solutions New Equity/ Shareholder Loans Court-sanction agreement with creditors Insolvency / other statutory routes Out of Court All-Parties Restructuring Enforce Security New Money cross default provisions Freefall insolvency Worst return for creditors

20. Conclusion  Focus on value preservation: create awareness of consensual options beyond waivers / amendments / enforcement / court insolvency process  2009 will bring more aggressive balance sheet restructurings across sectors in the region  Debris floating to the surface – many years to work it out  The more drastic the measures, the more focus on the legal docs  Each situation is different  People with cash and patience are the kings  Plenty of exciting opportunities

21. Contact information Willibald Plesser Co_Head CEE/CIS T +43 1 515 15 206 E willibald.plesser@ freshfields.com

22. © Freshfields Bruckhaus Deringer LLP 2009 This material is for general information only and is not intended to provide legal advice.