Turkey, Financial Structuring of Large Scale Loans – Insolvency/Bankruptcy/Restructuring

0

To print this article, all you need to do is be registered or log in to Mondaq.com.

Following the changes to the Financial Restructuring Framework Agreements, announced by a public statement dated 16.07.2021 by the Association of Banks of Turkey, the loan structuring process of large corporations whose loan debts exceed 100 million of TL was determined as follows;

Goal;

In accordance with the transitional provision n. 32 of Banking Law No. 5411 and relevant legislation; The main objective is to facilitate the repayment process of debtors of commercial loans who are experiencing temporary complications as well as those who are likely to encounter problems regarding the execution of their debts to banks who are in the position of creditor organizations, and to promote their additional contribution to employment through measures to be taken in accordance with creditors and other creditor organizations in the form of issuance protocols.

Nevertheless, it is required that the debtors who are to be covered by the FRS acquire the capacity to repay their debts, following the restructuring of their financial situation and, in this sense, the restructuring of their contracted debts, or commit to a new amortization schedule. Debtors deemed unable to acquire the capacity to repay their debts will not be included in the scope of the FRS.

The scope of the FRS;

In addition to questions relating to the commitment of the existing risk at a maturity with regard to the conditions which will be determined according to the debtor, the provision of additional financing (for working capital purposes and/or financing unfinished or new investments)liquidation of activities not directly related to the principal activity of the debtor, capital increase, change of management, public offering, sale of affiliated companies and assets, modification of the corporate structure, constitution of pledges and/or usufruct rights for the benefit of the creditors who have signed the FYYS, the assignment of the assets of the common relatives and the first degree of the applicant debtor to the Creditor Institutions in guarantee if this is deemed necessary, the promulgation of any modifications
(individually, partially or cumulatively) which are considered imperative to incorporate the debtor into the economy can be made or requested by the debtor.

Debtors to be subject to the FRS;

Apart from loan debtors who have a bankruptcy decree issued against them, companies with principal debt above TL 100 million in cash and non-cash, will be able to approach banks which are the creditor institutions.

Make a request ;

Loan debtors; can apply to one of the three Creditor Organizations which are the highest creditor.

A consortium of creditor organizations (OCC) will be set up to carry out the reconciliation process provided for in the framework agreement and to participate in the implementation stages of the process. The CCO may decide to continue negotiations with the debtor of the loan, alongside a committee composed of a sufficient number of CCO members, under the direction of the LB, provided that the final decisions are taken by the CCO in order to ensure the smooth running of the process. quickly.

The LB will be selected by the CCO on the basis of the statement of the amount of receivables transferred to the Creditor Organization which received the request. The creditor organization which occupies the position of largest creditor in the CCO, will act as LB for the management, conclusion and follow-up of the relevant negotiations (it is also possible that another creditor organization is selected as LB in accordance with the framework agreement) .

The evaluation of the candidacy;

If the contract concluded with the debtor within the framework of the Framework Agreements is signed by the majority of the Creditor Organizations which represent 2/3 of their debts, the restructuring of the debts by the Creditor Organizations signatories of the Framework Convention is mandatory.

At the request of at least two of the members of the CCO in the application process and provided that an affirmative decision is taken by the Creditor Institutions which represent 2/3 of the total amount of claims of the member Creditor Organizations towards the CCO and at least two of the creditor organizations that are members of the CCO, without deviating from the fundamental principles set out in the preamble of the FRSC, a review may be carried out.

If the CCO does not reach a decision on the restructuring within a maximum period of 90 days from the date of the request, the process will end. This period may be extended by a maximum of 90 days by decision of the Creditor Organizations which represent 2/3 of the total amount of the claims of the Creditor Organizations and of at least two of the Creditor Organizations members of the CCO. A maximum of two applications may be submitted during the term of the framework agreement.

Restructuring parameters to consider;

In large-scale loan debt restructuring, small-scale loan debt restructuring parameters are not included.

The interest rate to be determined in the protocol which will be signed by the client will be concluded by the decision of more than one creditor organization member of the CCO which owns at least 2/3 of its total claims. However, in order to apply an interest rate lower than 75% of the reference interest rate of the TRY on the date of the request, the concurring decision of more than one member holding at least 90% of the total claims of the organizations creditors who are CCO members will be required.

The process of preserving the status of the debtor;

The process of preserving the status of loan debtor companies whose applications are accepted will then begin.

The debtor will not undertake any business that would make a difference between creditors (individually or as a group)including members of Creditor Organizations, during the “Preservation of Status Process”.This restriction will also cover other persons and organizations with which the debtor concerned is linked, as well as their partners.

Once the request has been duly submitted to the creditor organization and shared with the creditor organizations concerned, the “Status Preservation Process”will start without going through any procedure. During this procedure, the Creditor Organizations will not be able to initiate enforcement proceedings against the debtor concerning the debts subject to financial restructuring, this procedure will not be continued, no new procedure will be initiated and no no other remedy will be exercised. , with the exception of situations that will result in a loss of rights due to the limitation period and the expiration of forfeiture periods. Whether or not to maintain the “Preservation of the Situation” will be decided at the first meeting of the CCO, however in the absence of an opinion at this meeting, it will be presumed that the opinion of the Creditor Organization is favorable. to the continuation.

In the event of legal action brought by the Creditor Organization before the date of application and if, as a result: a date of sale is fixed, the action for termination of the call for tenders is in progress, the debt has been linked to the execution commitment, the lawsuit for annulment of the execution is in progress, these transactions will not be affected by the FRS. The Creditor Organization(s) implementing the said operations may waive them if they so wish. If a waiver is not in question, the Creditor Organizations which represent 2/3 of the total amount of the Creditor Organizations’ claims and at least two of the Creditor Institutions members of the CCO will decide whether the FRS process will continue or not.

The status of the guarantee in the banks;

It is essential to protect existing collateral received by creditor agencies before the process is initiated and, to this end, provisions for the recovery of secured claims, their distribution and the conversion of collateral into cash will be included in the FRSC which is to be conclude with the debtor concerned and, where applicable, in the contracts to be concluded between the Creditor Organizations.

Encumbrances, other than pledges/mortgages that have been previously placed by creditor organisations, parties to the FRSC on assets for which a pro rata guarantee will be received, will be released with the pro rata guarantee received.

In the event that the collateral received before the FRSC is converted into cash after the FRSC, the payment plan of the creditor organization concerned will be revised in order to reduce the amounts of the installments without modifying the number of installments and the due date, by deducting the amount of recovery in equal parts from the amount of the deposit of the Creditor Institution concerned.

If the guarantee is established on a pro rata basis to follow the existing loads that are installed on the assets subject to the guarantee, the CCO will decide to which payments the pro rata collection equivalent to the guarantee will be allocated.

Monitoring criteria;

The monitoring and control criteria will be determined in the FRSC to be concluded with the debtor of the loan.

Arbitration Board;

The Arbitration Board to be determined by the Board of Directors of the Association of Banks of Turkey will be competent to resolve disputes that may arise if the creditor organizations do not fulfill their obligations under the Framework Agreement.

The period of validity 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 Provisional Article n.32 of Banking Law No. 5411.

Enforcement

The framework agreement signed by the parties and prepared by the Association of Banks of Turkey in accordance with the relevant provisions of the regulations will enter into force after approval by the Banking Regulation and Supervision Agency.

ABBREVIATIONS:

FRS: Financial restructuring

FRSC: Financial Restructuring Agreement

CCO: Consortium of creditor organizations

LB: leading bank

THE REFERENCES:

FYY Framework Agreement of Large-Scale Implementation of Banking Association of Turkey – July 2021

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

Share.

About Author

Comments are closed.