Following the amendments made in the Financial Restructuring Framework Agreements, announced with a public declaration dated 16.07.2021 by the Banks Association of Turkey, the process of structuring the loans of large-scale companies whose loan debts are above 100 million TL has been determined as follows;
Aim;
Pursuant to the transitional provision n. 32 of the Banking Law No. 5411 and the relevant legislation; The primary aim is to facilitate the repayment process of the commercial loan debtors who are experiencing temporary complications as well as those who are likely to encounter problems regarding the fulfillment of their debts to the banks which are in the position of the Creditor Organisations, and to promote their further contribution to employment through measures that will be taken in compliance with the creditors and other Creditor Organisations in the form of issuing protocols.
Nonetheless, it is required that the debtors that are to be covered by the FRS should acquire the ability to repay their debts, as a result of the restructuring of their financial situation and in this sense, the restructuring of their incurred debts, or committing to a new amortization plan. Debtors who are deemed to be unable to acquire the ability to repay their debts will not be included in the scope of FRS.
The scope of the FRS;
In addition to the matters concerning the commitment of the existing risk to a due date in light of the conditions that will be determined based on the debtor, the provision of additional financing (for working capital purposes and/or financing unfinished or new investments)the liquidation of activities not directly related to the main activity of the debtor, the increase of capital, the change of management, the public offering, the sale of affiliates and assets, the alteration of the partnership structure, the establishment of pledge and/or usufruct rights in favour of the creditors that have signed the FYYS, the cession of the assets of common and first degree relatives of the applicant debtor to the Creditor Institutions as collateral if deemed necessary, the enactment of all modifications (individually, partially or cumulatively) which are seen as imperative in order to incorporate the debtor into the economy may be made or requested to be made by the debtor.
The debtors to be subject to the FRS;
Apart from the loan debtors who have a decree of bankruptcy issued against them, companies whose principal debt is more than 100 million TL in cash and non-cash, will be able to apply to the banks that are the Creditor Institutions.
Making the application;
Loan debtors; may apply to one of the three Creditor Organizations who are the highest creditor.
A consortium of Creditor Organisations (CCO) will be established in order to realize the reconciliation process envisaged in the Framework Agreement and to take part in the implementation stages of the process. The CCO may decide to continue the negotiations with the loan debtor, alongside a committee consisting of a sufficient number of CCO members, under the leadership of the LB, provided that the final decisions are concluded by the CCO in order to ensure that the process works quickly.
The LB will be selected by the CCO on the basis of the statement of the amount of the receivables conveyed to the Creditor Organization that received the application. The Creditor Organization that holds the position as the largest creditor in the CCO, will act as the LB for managing, concluding and monitoring the relevant negotiations (it is also possible for another Creditor Organization to be selected as the LB according to the Framework Agreement) .
The evaluation of the application;
If the contract concluded with the debtor under the scope of the Framework Agreements is signed by the majority of the Creditor Organizations that represent 2/3 of their receivables, the restructuration of the receivables by the Creditor Organizations that have signed the Framework Agreement is mandatory.
Upon the request of at least two of the CCO members in the application process and with the condition that an affirmative decision is reached by the Creditor Institutions who represent 2/3 of the total amount of receivables of the Creditor Organizations member to the CCO and at least two of the Creditor Organizations member to the CCO, without diverging from the fundamental principles stated in the preamble of the FRSC, a revision can be conducted.
If the CCO cannot reach a decision concerning restructuration within a maximum of 90 days starting from the date of the application, the process will terminate. This period can be extended for a maximum of 90 days with the compliant decision of the Creditor Organizations who represent 2/3 of the total amount of receivables of the Creditor Organizations and at least two of the Creditor Organizations member to the CCO. A maximum of two applications can be made within the term of the Framework Agreement.
Restructuring parameters to consider;
In the restructuration of large-scale loan debts, the restructuring parameters for small-scale loan debts are not included.
The interest rate to be determined in the protocol that will be signed by the customer will be concluded by the decision of more than one Creditor Organizations member to the CCO who own at least 2/3 of their total receivables. However, in order to apply an interest rate lower than 75 percent of the Reference interest rate for the TRY on the date of application, the concurring decision of more than one member who owns at least 90 percent of the total receivables of the creditor organizations that are members of CCO will be required.
The process of preserving the status of the debtor;
The process of preserving the status of the loan debtor companies whose applications are accepted will start next.
The Debtor shall not undertake any ventures which will make a difference between the creditors (individually or as a group), including the members of Creditor Organizations, during the "Preservation of the Status Process". This restriction will also cover other persons and organizations with which the relevant debtor is related, as well as their partners.
Once the application is duly submitted to the Creditor Organization and shared with the relevant Creditor Organizations, the “Process of the Preservation of Status” will begin without being subjected to any procedures. During this process, the Creditor Organizations will not be able to carry out enforcement proceedings against the debtor regarding the receivables subject to financial restructuring, the present proceedings will not be furthered, new proceedings will not be initiated, and other legal remedies will not be sought, except for situations that will lead to loss of rights due to the statute of limitations and the expiry of forfeiture periods. Whether the "Preservation of the Situation" will continue or not will be decided at the first CCO meeting, however in the event of no opinions being stated at this meeting, it will be assumed that the opinion of the Creditor Organization is in favour of the continuation.
In the event of legal proceedings being taken by the Creditor Organization before the date of application and if, as a result: a sale date is determined, the lawsuit for the termination of the tender is in process, the debt has been connected to the execution commitment, the lawsuit for the cancellation of the execution is ongoing, these transactions will not be affected by the FRS. The Creditor Organization(s) implementing the said transactions may waive these if they wish so. If a waiver is not in question, the Creditor Organizations who represent 2/3 of the total amount of receivables of the Creditor Organizations and at least two of the Creditor Institutions member to the CCO will decide whether the FRS process will continue or not.
The status of the collateral in the banks;
It is essential to protect the existing collaterals received by the Creditor Organizations before the initiation of the process, and for this purpose, provisions concerning the collection of secured receivables, their distribution and the conversion of collaterals into cash will be included in the FRSC that is to be made with the relevant debtor and, if necessary, in the contracts to be concluded between the Creditor Organizations.
Encumbrances, other than pledges/mortgages that were previously placed by the Creditor Organizations, party to the FRSC on the assets for which pro-rata collateral will be received, shall be released together with the pro-rata collateral being received.
In the event that the collaterals received before the FRSC are converted into cash after the FRSC, the payment plan of the relevant Creditor Organization will be revised in order to reduce the amounts of the installments without changing the number of installments and the due date, by deducting the collection amount equally from the installment amount of the relevant Creditor Institution.
If the collateral is established pro-rata to follow the existing encumbrances that are installed on the assets subject to the collateral, the CCO will decide upon which payments the pro-rata collection equivalent to the collateral will be allocated to.
Monitoring criteria;
The monitoring and inspection criteria will be determined in the FRSC to be concluded with the loan debtor.
Arbitration Board;
The Arbitration Board to be determined by the Board of Directors of the Banks Association of Turkey will be competent in the resolution of disputes that may arise in the event of the Creditor Organizations not fulfilling their obligations arising from the Framework Agreement.
The validity period of the framework agreement;
The specified provisions will be valid for the FRSC to be signed between 19.07.2021 and 19.07.2023, as specified in the Provisional Article n.32 of the Banking Law No. 5411.
Enforcement
The Framework Agreement that is signed by the parties and prepared by the Banks Association of Turkey in accordance with the relevant provisions of the Regulation, will enter into force following the approval of the Banking Regulation and Supervision Agency.
ABBREVIATIONS:
FRS: Financial restructuring
FRSC: Financial restructuring contract
CCO: Consortium of creditor organizations
LB: Leading bank
REFERENCES:
FYY Framework Agreement of the Banks Association of Turkey Large-Scale Implementation-July 2021
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
