Panama, January 4, 2021. Morgan & Morgan has been recognized as a leading law firm in the 2021 edition of the International Financial Law Review (IFLR) 1000, a reference guide to the world´s leading financial and corporate law firms and lawyers.
The firm´s Corporate Law team earned top rankings in Banking and Finance, Capital Markets, M&A, and Project Development.
In addition, the following individual attorneys were ranked in the 30th edition of the guide:
Francisco Arias G.
Kharla Aizpurúa Olmos
Carlos Ernesto González Ramírez
Morgan & Morgan advised Itaú Corpbanca in connection with two credit facilities for an amount of up to US$83,801,622.00 and COP 367,366,730,694.00
Panama, November 30, 2019. Morgan & Morgan acted as Panamanian Counsel to Itaú Corpbanca and the other lenders, in connection with two credit agreements granted by certain lenders and Itaú Corpbanca, as administrative agent, for amongst other, the refinancing of certain existing debt of Decameron group.
The first for an amount of up to US$ 83,801,622.00 to Organización Decameron, S. de R.L. and Hoteles Decameron S. de R.L., and certain other companies part of the Decameron group who acted as guarantors of the financing.
And the other for an amount of up to COP 367,366,730,694.00 (Colombian Pesos) to Hoteles Decameron Colombia S.A.S. and Servincluidos, Ltda., and certain other companies part of the Decameron group who acted as guarantors of the financing.
Both credit agreements are secured by a collateral package that involves several jurisdictions, including and not limited to Panama. For purposes of Panama, there is a collateral package including a guaranty trust agreement, pledge over shares or quotas, as applicable, and guaranty agreements in the form of “fianzas”.
Partners Inocencio Galindo and Kharla Aizpurua Olmos, senior associate Pablo Epifanio, and associate Cristina De Roux; participated in this transaction.
Morgan & Morgan advised Banistmo, S.A. in connection with the public offering of senior secured notes for an amount of up to US$400 million issued through the ENA Master Trust
Panama, November 16, 2020. Morgan & Morgan acted as counsel to Banistmo, S.A., in connection with the issuance and placement of senior secured notes due 2048 with an interest rate of 4%, for an amount up to US$400,000,000.00, issued through the ENA Master Trust, a special trust vehicle created by Empresa Nacional de Autopistas, S.A. (ENA) to raise the funds to refinance certain obligations amongst others of ENA Sur, S.A. and ENA Este, S.A., both companies that owns the concession rights on toll roads knows as “Corredor Sur” and “Corredor Este”.
The notes were registered with the Superintendence of Markets of the Republic of Panama and listed in the Panama Stock Exchange and Luxembourg Stock Exchange, and placed in the United States of America under 144A/ Regulation S exemptions.
In this public offering, Banistmo, S.A. acted as trustee, to a special purpose trust created by Empresa Nacional de Autopista, S.A. (ENA), as settlor and servicer, and ENA Este, S.A., as settlor and ENA Sur, S.A., as settlors, known as “ENA Master Trust” that issued the bonds to raise the funds needed to refinance certain obligations amongst others of ENA Sur, S.A. and ENA Este, S.A., both companies that own concession rights on highways knows as “Corredor Sur” and “Corredor Este”.
To achieve this issuance, it was necessary to cover complex legal aspects of several jurisdictions, the modification of the existing terms of the bonds issued by ENA Sur Trust and ENA Este Trust, an early redemption of the notes issued by the ENA Sur Trust, among other aspects. The transaction at hand was a complex cross-border transaction covering aspect of several jurisdictions, which in addition required for the existing terms of the notes issued by the ENA Sur Trust and the ENA Este Trust to be amended as well as an early redemption of the notes issued by the ENA Sur Trust.
It is important to mention that we acted as wellMorgan & Morgan acted as well as counsel to Banistmo, S.A. for purposes of the relevant legal matters that arouse for the existing notes issued by the ENA Este Trust, in which Banistmo, S.A. is the trustee as well.
Partners Kharla Aizpurua Olmos, Inocencio Galindo, Ricardo Arias and Jose Carrizo, and senior associate Pablo Epifanio, participated in this transaction.
Morgan & Morgan advised Banistmo, S.A., in an up to US$315.6 million loan agreement for the financing of the acquisitions of CDNOs related to Line 2 of Panama´s City’s metro system.
Panama, September 29, 2020. Morgan & Morgan provided legal counsel to Banistmo, S.A., as Administrative Agent and Collection Agent, in connection with a loan agreement for an amount of up to US$315,601,312.14 between CitiGroup Global Markets, Inc. and UBS Securities LLC, as Joint Lead Arrangers and Bookrunners, various local and international banks as lenders, Banistmo, S.A., as Administrative Agent and Collection Agent to finance the acquisition by the borrower of the CDNOs.
The transaction included an agreement with Metro de Panama, S.A. to exchange the CDNOs, acquired in order to differ payment date, for consolidated CDNOs (“Aglutinados”).
Partner Kharla Aizpurua Olmos represented Morgan & Morgan in this transaction.
Panama, October 2, 2020. Once again, Morgan & Morgan receives top rankings in the recently released Chambers & Partners Latin America Guide 2021, a key reference point of Latin American top law firms.
Morgan & Morgan has been recommended in several practices due to the firm´s excellent performance and prominent work in each one of these areas.
Likewise, the directory classifies within the top Bands the following attorneys of the firm:
- Inocencio Galindo: Banking and Finance / Projects and Energy / Corporate and M&A.
- Francisco Arias G.: Banking and Finance / Capital Markets / Corporate and M&A.
- Ramon Varela: Banking and Finance, Projects and Energy.
- Roberto Vidal: Corporate and M&A.
- Kharla Aizpurua Olmos: Banking and Finance.
- Ricardo Arias: Capital Markets.
- Ana Carolina Castillo Solis: Projects and Energy.
- Allen Candanedo: Intellectual Property.
- Maria Eugenia Brenes: Intellectual Property.
- Simon Tejeira Q.: Dispute Resolution.
- Jose Carrizo: Dispute Resolution.
- Luis Vallarino: Dispute Resolution.
- Jazmina Rovi: Shipping.
- Juan David Morgan Jr.: Shipping (Litigation).
- Francisco Linares: Shipping (Litigation).
Congratulations to all of them, and thanks to our clients for trusting us as their legal advisors in Panama.
Morgan & Morgan advised Panasolar Generation, S.A. in an issuance of corporate green bonds for US$15,500,000.00.
Panama, September 29, 2020. The green bonds are certified under the Climate Bonds Certification Scheme run by the Climate Bonds Initiative, an international, investor-focused non-profit organization, and the only organization working solely on mobilizing the $100 trillion bond market for climate change solutions.
The Climate Bonds Standard and Certification Scheme is a labelling scheme for bonds, loans & other debt instruments. Rigorous scientific criteria ensure that it is consistent with the goals of the Paris Climate Agreement to limit global warming to under 2 degrees. The scheme is used globally by bond issuers, governments, investors, and financial markets to prioritize investments that genuinely contribute to addressing climate change. This certification is the main international award recognizing the best practices in green finance, covering green bonds, loans and significant market developments in climate and transition investments.
The green bonds also have a verification by Pacific Corporate Sustainability (PCS) of the Pacific Credit Ratings group.
The green bonds have been registered with the Superintendency of Capital Markets of Panama and will be listed on the Panama Stock Exchange. MMG Bank acted as arranger and is engaged as bookrunner and paying agent of the green bonds.
Partners Roberto Vidal, Kharla Aizpurua Olmos and Ricardo Arias, and associate Cristina De Roux participated in this transaction.
Panama, May 22, 2020.
The German-Panamanian Chamber of Commerce and Industry, in alliance with the Swiss-Panamanian Chamber of Commerce, the Franco-Panamanian Chamber of Commerce, and the Panamanian-Dutch Chamber of Commerce, held the Webinar “Main Banking Regulation in times of COVID-19” (Rule 4-2013 and Rule 2-2020).
This Webinar was presented by Kharla Aizpurua Olmos, partner at Morgan & Morgan.
COVID-19: Additional, exceptional and temporary measures adopted by the Superintendency of Banks of Panama and the Panama Banking Association.
Updated on May 21, 2020.Rule 2-2020, as amended by Rule 3-2020 of the Superintendency of Banks of Panama (hereinafter, “SBP,” for its initials in Spanish).
On March 16, 2020, the SBP issued Rule 2-2020, which was subsequently amended by Rule 3-2020 (here in after referred to as “Rule 2-2020″) and “establishes additional, exceptional and temporary measures for compliance with the provisions contained in Rule 4-2013 on credit risk”.”.
Rule 2-2020 creates a new category of credits named “modified credits” and it allows banks, in agreement with their debtors, to modify the conditions originally agreed without this being considered a “restructured credit.”
Relevant topics for the purposes of this agreement are:
- These credits must: (i) meet financial viability criteria through their new terms and conditions, taking into account the debtor’s ability to pay and the bank’s credit policies; (ii) be subject to special monitoring by the bank; and (iii) be recognized as restructured, if debtors fail to comply with the modified terms and conditions;
- loans classified as normal and special mention, as well as restructured credits that are not in arrears payment, may be modified;
- contracts that are modified must be identified for special monitoring by the SBP;
- during the duration of exceptional and temporary measures, for purposes of negotiating specific terms and interest rates, banks shall take into account the current situation facing the country;
- the modification of the credits is exempt from charges and fees by the bank except for legal, notary and registration expenses paid to third parties;
- modification of the loans shall be exempt from the requirement to update the appraisal;
- the bank shall establish specific policies and procedures for the management and monitoring of requests to change the conditions of these credits;
- the date of modification shall be the date on which the debtor has accepted the modifications by any means or modality (including electronic means, tacit acceptance, presumed acceptance by silence, etc.); and
- As an exceptional and temporary measure, banks will be able to use up to 80% of the dynamic provision for the establishment of specific provisions. To use more than 80%, banks must obtain authorization from the SBP. Banks may only pay dividends once they have refunded the amount of the dynamic provision that corresponds to them according to their credit portfolio.
Circular No. SBP-DR- 0118-2020 of April 8, 2020.
The SBP issued the circular to:
- Request banks to ensure that they do not charge interest on interest, moratorium interest, or interest capitalization on loans that have been modified under Rule 2-2020;
- Reiterate that modified credits are exempt from the application of commissions and charges, except for legal, notary and registration expenses which are to be paid to third parties; and
- Urge financial institutions to administer the interest rate applicable to modified credits so as not to impair, as far as possible, the financial situation of customers.
Official Statement on the Moratorium Extension Agreement until December 2020 issued by the Panama Banking Association (hereinafter, “ABP”).
On May 4, 2020, the ABP issued the official statement on the moratorium extension understanding (here in after referred to as the “Commitment Understanding”) until December 2020, in which the ABP announces the extension and incorporation of new financial relief measures to support their customers affected by COVID-19.
The Commitment Understanding establishes that:
- The benefits granted under the Commitment Understanding are for “persons who have had their employment contract suspended or terminated, the self-employed and commercial workers, whose activity has been affected by the health measures established by the Executive Branch” and is mainly to extend the moratorium until December 2020;
- The Commitment Understanding applies to residential mortgage loans, personal loans, car loans, credit cards, small and medium-sized enterprises loans, commercial loans, transport and agricultural loans, and
- It is expressly established that during the remainder of 2020, banks’ commitment continues not to foreclose on existing residential mortgages.
For any additional information, please contact:
Kharla Aizpurúa O.MO
RGAN & MORGANTel:
265-7777 ext. 7652
Morgan & Morgan advised Parque Industrial y Corporativo Sur, S.A. in connection with the public offering of revolving corporate bonds for an amount of up to US$100 million
Panama, April 24, 2020.
Morgan & Morgan advised Parque Industrial y Corporativo Sur, SA, in relation to the public offering of revolving corporate bonds (hereinafter the “Bonds”), which will be issued in multiple series, which may be senior series or subordinated series under a revolving program in which the outstanding principal balance of the Bonds issued and owed, in a single moment, may not exceed One Hundred million Dollars (US $100,000,000.00), legal tender of the United States of America. The series A of the Bonds may be guaranteed with a guarantee trust that has the usual assets for this type of transaction, such as monies, assigned rights, mortgages, among others.
Parque Industrial y Corporativo Sur, S.A. is a 42-hectare multipurpose project with high-quality, first-world infrastructure and buildings that serve as a storage and logistics center.
January 13, 2020
For a long time, we have heard in different social media, for various reasons, some more positive than others, information related to Turnkey Contracts and the State indebtedness resulting from the Partial Payment Accounts (in Spanish, “Cuentas de Pago Parcial”) and Certificates of No Objection (in Spanish, “Certificados de No Objeción”). Do you know what these legal concepts that have been used to finance the largest State projects in the last two government administrations are? Let’s get today into a few lines, because in the words of Rudyard Kipling “You learn more by what people talk to each other or by what it is understood, than by asking questions.”
- What is a Turnkey Contract?
Turnkey Contracts are regulated by Law 22 of 2006, as amended from time to time, concerning public procurement. This same law defines this type of contracts as: “the one in which the contractor undertakes before the State to perform different services, that must include as a general rule, studies, designs, supplies and execution of a project for a determined global price by the bidder entity, in accordance with the provisions of the contract and of the tender documents”. These contracts may also include the equipment, operation of the project or any other provision within the contractor’s obligations. In addition, the contractor must have its own financing for the project.
Consequently, the contractor accepts responsibility of the project delivery (taking over construction risk) but in addition to the operation, in the sense that the mandate must include as the term says, “turnkey”, the project delivery ready to be put into operation by the State (for the purposes of this article I will refer to the State in general terms, without specifying or differentiating between Central Government, decentralized entities and public companies), which has carried out the correspondent bid.
The greatest responsibility assumed by the State in this type of contracts is the supervision of the construction of the respective project and payment to the contractor.
- What is a Partial Payment Account or a Certificate of No Objection?
First, is that both terms refer to the same type of legal instrument and have only been interchangeably used depending on the entity that issued them. For reference, the Ministry of Public Works, the Social Security Fund, Empresa de Transmisión Eléctrica, S.A. and the National Institute of Culture have named it as “Partial Payment Accounts”; nevertheless; the Ministry of Health and the Metro de Panamá have named it as “Certificate of No Objection.” Therefore, from now on, we will call them the “Payment Documents”. Having clarified the above, the Payment Documents have been regulated through regulations and/or procedures adopted and promulgated by the respective entities as well as in the Turnkey Contracts. There is no law that regulates them.
In general terms, the main characteristics of the Payment Documents are:
- Once each Payment Document has been issued, it constitutes an autonomous, independent, unconditional and irrevocable obligation of the contracting entity for the amount expressed therein and is payable on the date indicated in the document without the possibility that once issued, the entity can make tax reductions, fines, penalties, compensations, deductions, claims or other withholdings.
- The contracting entity may only deduct or compensate amounts from the Payment Documents to be issued.
- Once the Payment Document is issued by the entity and endorsed by the General Comptroller of the Republic, contains the net amount to pay.
- Having issued and endorsed the Payment Document, the contracting entity will only have the resource to initiate corresponding legal proceedings against the respective contractor or the guarantor for taxes, fines, penalties, compensations, deductions, claims or other withholdings; and
- Payment Documents must be paid on the date indicated on them, even in the case of early termination, suspension or administrative resolution of the Turnkey Contract, regardless of the cause or claims between the contracting entity, the contractor and/or the bonding company, with respect to any matter related or not to the project and regardless of whether the project has been completed.
In accordance with the information published by the Ministry of Economy and Finance and on the website datosabiertos.gob.pa as of October 31st, 2019, there were Payment Documents that sum up the amount of US$834,770,000 (payable between October 2019 and until the year 2022) as detailed by contracting entity and by the respective project, on the website of the Ministry of Economy and Finance (www.mef.gob.pa) and www.datosabiertos.gob.pa.
- Why are Payment Documents attractive in financing?
Two important facts mentioned in previous answers: in Turnkey Contracts the contractor must have its own financing for the project and the inherent characteristics of the Payment Documents. Based on these two factors, the Payment Documents, as mean of payment for the contracting entities, turn the Turnkey Contracts into a way of securing and conserving the interest of financial entities in relevant State projects.
Financial institutions acquire the Payment Documents at a discount and the contractors assign these Payment Documents to the financial entities. The financial institutions are certain of the payment from the State on the date set forth in the Payment Document regardless of what happened with the respective work or project.
In case of non-payment by a contracting entity, provided that it is part of the Central Government of a Payment Document, there is always the possibility of suing the State, municipality or any other decentralized, autonomous or semi-autonomous entity, under the procedure established in the articles 1047 and 1048 of the Judicial Code.
- What does the issuance of Payment Documents represent for the State?
The Payment Documents do not represent a financial indebtedness to the State, that is, they are not shown in their finances as in the case of bonds issuance. The Payment Documents are accounts payable as a result of investment expenses, which are also of long duration and therefore, must be covered by subsequent general State budgets (the general budget of the State is approved annually).
Based on the foregoing, and since everything must be shown in the annual general state budget, the Ministry of Economy and Finance, for example, per each Turnkey Contract, must: (i) give its no objection to the conditions related to the dates and payment amounts of the work, as well as its duration and the total amount, prior to the call for bid; and (ii) once the bid has been awarded to a contractor, funding proposal must be delivered which will be subject to its review, negotiation and subsequent approval.
- How does the Social Tax Responsibility Law affect?
Law 34 of June 5, 2008 on Social Tax Responsibility, as amended from time to time, aims to establish rules, principles and methodologies to consolidate tax discipline in the financial management of the Public Sector. Said law and the General State Budget Law, refer to the term “Non-Financial Public Sector”, as the group of all the entities of the General Government (composed by the National Assembly, the General Comptroller of the Republic, the different ministries, the Judicial Authority, the Public Ministry and the Electoral Court) and Non-Financial Public Companies (industrial or commercial units owned by the Government that sell public goods and services on a large scale, and that are constituted as stock capital companies or of other type of legal status such as: the Colon Free Zone, the Panama Maritime Authority or the National Charity Lottery). The “Non-Financial Public Sector” differs from the total Public Sector which includes public financial institutions, deposit collectors, Empresa de Transmisión Eléctrica, S.A., Empresa Nacional de Autopistas, S.A., Aeropuerto Internacional Tocumen, S.A. and the Panama Canal Authority.
Article 10 of the Social Tax Responsibility Law provides that the annual laws of the General State Budget and the budget execution shall be subject to the guidelines of this law. In addition, it is set forth that the Gross Domestic Product of the reference shall be calculated by the National Statistics Institute of the General Comptroller of the Republic. The maximum limit of the Tax Balance deficit of the Non-Financial Public Sector will be of 3.50% of the Gross Domestic Product for fiscal year 2019, of 2.75% for fiscal year 2020, of 2.50% for fiscal year 2021 and 2.0% as of fiscal year 2023.
In addition, Article 13 of Executive Decree No. 52 dated June 3rd, 2019, which regulates the Social Tax Responsibility Law, establishes that the investment expenses to be made under the modalities of turnkey projects and of deferred payment projects in a tax term may not exceed 20% of the total investment expenses of the Non-Financial Public Sector in the respective fiscal period.
The use of this type of legal instruments as a form of payment allows contracting public entities to obtain greater efficiency in the financing of projects and to manage their annual budgets based on an agreed payment schedule. To the extent that the limits of the Social Tax Responsibility Law are met and complied, without requesting continuous waivers to these limits, they are still an efficient way to handle accounts payable debt due to the investment expenses necessary to keep public services at appropriate levels of services to the requirements of the population.
Kharla Aizpurua Olmos
Partner, Morgan & Morgan