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Articles Financial Restructuring

Financial Restructuring

April 2020, Erdemir&Özmen Attorney Partnership

Financial Restructuring

The companies, experiencing difficulties in their cash flows and in payment of their debts in consequence of the economic fluctuations occurred in our Country in recent years, resort to shrink, their credit registry records are affected negatively before banks since they are unable to make their payments, and they are faced with even the threat of compulsory enforcement consequently. In order that the negative effects of economic fluctuations on the real market are mitigated and that the process is also kept under control by the borrowers on the basis of an agreement reached between the borrowers and the creditor institutions for the debts owed to the financial institutions, the opportunity of financial restructuring is introduced by the temporary article 32 added into the Banking Law numbered 5411 by virtue of the Law numbered 7186 on Making Amendments to the Income Tax Law and Certain Laws, as published in the Official Gazette (Reiterated) dated 19.07.2019 and numbered 30836.

Pursuant to this legal arrangement, as regards the credit debts owed by the borrowers to the banks, financial leasing companies, factoring companies and financing companies operating in Turkey, where there is a crediting relationship between those borrowers and entities, it is aimed to enable those borrowers to continue fulfilling their repayment obligations and contributing to the employment, by means of framework agreements and the measures to be taken under those agreements.   

A- Reviews on the legal arrangement made in respect of financial restructuring

When the temporary article 32 [1] added into the Banking Law is reviewed:

 1- Issuance purpose and effective period of the provision

“The borrowers may also be made subject to restructuring partially or as a whole with other borrowers in their own risk group, with a view to enabling them to continue performing their debt repayment obligations and contributing to employment, by means of the measures to be taken with respect to loan facilities made available to them by the financial institutions mentioned hereinabove. The principles and procedures regarding the financial structuring to be executed pursuant to this article shall be determined by means of the Framework Agreements prepared in accordance with the provisions of the regulation issued by the Agency. The provisions of this article shall apply for a period of two years as from the publication date of this article. The President of the Republic is authorized to extend this period for a further period of two years.”

Thereby, both the purpose of the legal arrangement is specified and the effective period of the article is determined. Accordingly, the statutory provision shall remain in force and apply for 2 years as from 19.07.2019 namely the publication date. Furthermore, it is stated that this period may be extended by the President of the Republic for a further period of 2 years. In case a presidential decree, extending the period, is not published, this statutory provision shall be deemed to have been abolished automatically at the end of the 2 years’ period.

2- Definition of the borrowers that may benefit from the statutory provision within the context of financial restructuring

In the statutory text, the following definition is provided about the persons that will be considered as borrower within the context of financial restructuring:

“The companies founded in Turkey, other than the entities the subject to the article 35 of the Law numbered 6362, with the exclusion of investment partnerships, and this Law, the Insurance Law dated 3/6/2007 and numbered 5684, the Law numbered 6361, and the Law dated 20/6/2013 and numbered 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions”

Pursuant to this provision: 

- the companies founded under the Banking Law numbered 5411,

- the companies founded under the Insurance Law numbered 5684,

- the companies founded under the Financial Leasing, Factoring and Financing Companies Law numbered 6361,

- the entities subject to the article 35 of the Capital Market Law numbered 6362 (with the exception of investment partnerships and the Law dated 20/6/2013 and numbered 6493 on Payment and Securities Settlement Systems, Payment Services and Electronic Money Institutions)

are not considered as borrower. Therefore, the companies which remain outside those listed above and were founded in Turkey may benefit from financial restructuring as a borrower.

3- Determination of the financial situation of the borrowers requesting for financial restructuring, and assessment of whether the borrower will be taken into the scope of financial restructuring

The third and fourth paragraphs of the temporary article 32 are as follows:

“It is essential to determine the financial situations of the borrowers to be taken into the scope of financial restructuring and accordingly, to reach a conclusion that they will regain their solvency and ability to repay their outstanding debts in result of restructuring of their debts. The borrowers, about which the conclusion is reached that they will not be able to regain their solvency and ability to repay their outstanding debts, shall not be taken into the scope of financial restructuring.  

For the determination of the financial situation of borrowers that will be taken into the scope of financial restructuring and for the assessment on the feasibility of financial restructuring; independent audit firms, or institutions that have adequate knowledge and expertise as will be identified under the Framework Agreements, or if accepted by the borrower, creditor institutions shall be hired and assigned.”

Pursuant to this legal arrangement, it is prescribed that the asset and liability values, financial statements and current activity situation of the borrower to be taken into the scope of financial restructuring shall be determined and that, in case of financial restructuring, it shall be assessed whether this restructuring will succeed in terms of the borrower’s current situation. It is expressly set forth that the borrower shall not be taken into the scope of financial restructuring, if it is understood that the borrower’s current position will fail to have the ability of repayment after the restructuring. The Law prescribes that, at the discretion of the parties, the relevant assessments may be carried out by independent audit firms, or alternatively by creditor institutions if this is accepted by the borrower. 

4- Opportunities that may be provided to the borrower within the context of restructuring

Pursuant to the fifth paragraph of the above article, a wide range of measures and opportunities, i.e. such as the followings ones, may be taken for and provided to a borrower taken into the scope of financial restructuring:  

- To extend the maturities of the loans,

- To renew the loan facilities,

- To make additional loan facilities available without prejudice to the provisions of the subparagraph (b) of the first paragraph contained the article 9 in the Law numbered 6361,

- To reduce the amount of or partly or fully waive of the principal, interest, default interest, delay charges and profit shares or dividends and all kinds of receivables arising from the crediting relationship,

- To reduce the collaterals and guarantees,

- To convert the principal, interest or profit share receivables into participations in whole or in part,

- To assign or transfer the same to special purpose companies or to investment funds founded under the Law numbered 6362, against cash, non-cash or other consideration conditional upon collection,

- To settle, sell or otherwise remove from the balance sheet, in whole or in part, in consideration of non-cash values belonging to the borrower or third parties,

- To enter into protocols by acting jointly with other creditor institutions and creditors.

Furthermore, for the goods and commodities covered by financial leasing agreements, it is prescribed that the provisions contained in the article 307 of the Enforcement and Bankruptcy Law numbered 2004 shall apply by analogy. This legal arrangement relates to the postponement of the sale and custody of pledged goods and the return of goods subject to financial leasing, and the Law prescribes that measures may also be taken about the goods and commodities subject to financial leasing.

5- Fee and tax exemptions prescribed for certain transactions and procedures carried out within the context of financial restructuring

The transactions to be carried out pursuant to the principles determined in the contracts prepared within this scope and the Framework Agreements concluded within the scope of this article:

- are exempt from prison fee as well as,

-  fees collected under the Act of Fees i.e. the Law numbered 492 (including judgment fee),

-  papers to be issued (including Framework Agreements, and Financial Restructuring Contracts) are exempt from the stamp tax collected under the Stamp Tax Law dated 1/7/1964 and numbered 488,

- amounts that will be collected by creditor institutions irrespective of the names under which they will be collected are exempt from the bank and insurance transactions tax payable by virtue of the Expense Tax Law dated 13/7/1956 and numbered 6802,

- loan facilities that are and will be made available are exempt from the resource utilization support fund.

So then, considering also the scope of the measures to be taken, it is understood that these exemptions will significantly reduce the burden of tax and fees imposed on borrowers and creditor institutions. However, a limitation is prescribed for these exemptions. Such that, the exemptions referred to in this paragraph shall not apply in cases where the creditor institutions dispose the assets and guarantees they have obtained or acquired directly or indirectly due to their transactions arising from Framework Agreements and the contracts concluded within this context, with the exception that the creditor institutions transfer these between each other or transfer them to the borrower.

- Furthermore, it is also prescribed that, as regulated by the subparagraph (r) of the paragraph 4 contained in the article 17 of the VAT Law, the exception that “transfer of the immovables and the participation stocks in the assets of the companies to banks, financial leasing and financing companies on account of the receivable is exempt from VAT” shall also apply to their transfer to the creditor institutions under the Framework Agreement and the Contracts.   

As understood in the light of the above, the legal arrangement has an extensive scope, and the occurrence of many hesitations that might be encountered in practice are prevented. Nonetheless, even though the statutory provision incorporates many details, it is stated that the practice pertaining to the financial restructuring shall be conducted under the Regulation and the Framework Agreements to be prepared in compliance with this Regulation. The Framework Agreements are such agreements which have been prepared by the Banks Association of Turkey after having received the opinions of the Participation Banks Association of Turkey and the Association of Financial Leasing, Factoring and Financing Companies and which have been approved by the Banking Regulation and Supervision Agency. The scope of the receivables that will be restructured, qualifications of the borrowers, the minimum amount and its conditions and the minimum items of the Financial Restructuring Contracts to be signed separately between the creditors and the borrowers shall be determined by the Framework Agreements established in accordance with the procedure set forth in the first paragraph of the article 5 contained in the Regulation. Two different Framework Agreements were published by the Banks Association of Turkey, as the Framework Agreement for Large-Scale Implementation published on 09.10.2019 and the Framework Agreement for Small-Scale Implementation published on 08.11.2019.

B- “Large-Scale Implementation” and “Small-Scale Implementation” differentiation

In Financial Restructuring, the differentiation of “Large-Scale” and “Small-Scale” implementation is set depending on the amount of the debt. Accordingly, the Large-Scale Implementation will come into question for the borrowers with total indebtedness of 25 million Turkish Liras and more than 25 million Turkish Liras to financial institutions, and the Small-Scale Implementation will be in question for the borrowers with total indebtedness of less than 25 million Turkish Liras to financial institutions.

a- Financial restructuring under the Large-Scale Implementation [2]

  • What are the application requirements?

It is implemented for the borrowers with total principal debts (cash + non-cash) owed to the creditor institutions in the amount of 25 million Turkish Liras and over, as of the application date. The restructuring may be implemented as a whole or in part for a borrower or for the other borrowers in the risk group in which the borrower is included. In order to benefit from the scope of the Large-Scale Implementation, the application should be in conformity with the following requirements i.e. it is necessary that the applicant companies:

- are not declared bankrupt. In case the firm is declared bankrupt while the Financial Restructuring process is ongoing, the provisions regarding the default shall apply to the borrower.

- Furthermore, in the course of the negotiation to be carried out in respect of the application submitted within this scope, in the case that the other creditors representing more than 25 percent of the amount of the debt, not a party to the Framework Agreement, have started legal proceedings and that these proceedings are not eliminated or removed within 30 days, the agreement negotiations may be ceased under the decision taken in this direction on the part of the creditor institutions representing at least two of the creditor institutions that are the members of the Consortium of Creditor Institutions and 2/3 of the total receivables of the creditor institutions that are the members of the Consortium of Creditor Institutions.

  • How shall the application be submitted, and how will the application review process take place?

The borrowers may file the application with one of the first three creditor institutions that have the highest receivable amount, by submitting the letter of application conforming to the format and enclosing the documents with the letter of application. The documents determined in the Framework Agreement are as follows:

1- The measures (short-term, mid-term and long-term) they envisage to take and the business plans they envisage to implement, other than the restructuring of the debts;

2- The balance sheets and profit/loss statements pertaining to the last three years and the trial balance sheet pertaining to the last period, certified by the tax office;

3- A breakdown of all the cash debts and non-cash risks (sureties, bills of guarantee and acceptances, checks and promissory notes and all other guarantees) by the creditors (including the other creditors), and the contact details pertaining to all the creditors;

4- A breakdown of all the movables and immovables (a breakdown of all the movables, securities, immovables and all the encumbrances established thereon);

5- A breakdown of all the real properties located in the Country or abroad, which real properties have been transferred within the last two years;

6- A breakdown of all the affiliates founded in the Country or abroad (along with their addresses, telephone and fax numbers and share percentages);

7- A breakdown of all the pending lawsuits filed by and against the borrower and all the pending enforcement proceedings initiated by and against the borrower;

8- The shareholding structure as of the application date; and

9- The Land Registry and Cadaster Information System (TAKBIS) deeds of consent.

The matter of whether or not the current application will be considered as a valid one in respect of any deficiencies that might be contained in the form relating to the letter of application and its enclosures will be resolved at the meeting of the creditor institutions.

However; if the creditor institution to which the application has been submitted is of the opinion that the Financial Restructuring process should not be continued and thus, the application should be rejected directly on the ground that the application contains conditions which are contrary to the banking usage and practices, are in bad faith or unacceptable etc., the creditor institution may state the justifications of the rejection and request for voting before the Consortium of Creditor Institutions. It is prescribed that the application may be rejected without initiating the Financial Restructuring process in result of the votes casted in this direction on the part of the creditor institutions representing at least two of the creditor institutions that are the members of the Consortium of Creditor Institutions and 2/3 of the total receivables of the creditor institutions that are the members of the Consortium of Creditor Institutions.

  • How will process, after the application, progress?

The creditor institution to which the application has been submitted shall:

-  within 3 business days, furnish information to the creditor institutions which declare that the borrower owes to them and are the parties to the Framework Agreement, and request these creditor institutions to declare their receivables and their collaterals, if any, so as to make a calculation in compliance with the method determined in the Framework Agreement.

-  In no later than 3 business days following the above notification made to the creditor institutions, the creditor institutions shall make such declaration to the creditor institution to which the application has been submitted. Upon the receivables are declared, the creditor institution to which the application has been submitted shall share within 3 business days with the creditor institutions the breakdown comprised of the amounts of the receivables declared.  

-  On the 10th business day following the borrower’s application, the Consortium of Creditor Institutions shall elect a Leader Bank by taking as basis the breakdown comprised of the amounts of the receivables declared to the creditor institution to which the application has been submitted. The creditor institution, which is in the position of the main creditor within the Consortium of Creditor Institutions, shall act as the Leader Bank with respect to the management and conclusion of the relevant negotiations and the monitoring of the implementation.

- On the basis of the written statement submitted by the applicant borrower, the Leader Bank shall determine the shareholders and borrowers included in the same risk group and deemed necessary to be handled together with the borrower taken into the restructuring process, and shall also request them to submit a letter of application and a letter of undertaking.

- The process shall terminate if the Consortium of Creditor Institutions fails to establish the restructuring decision within maximum 90 days as from the application date. This period may be extended for a further period of maximum 90 days by the decision taken in the same direction on the part of the creditor institutions representing at least two of the creditor institutions that are the members of the Consortium of Creditor Institutions and 2/3 of the total receivables of the creditor institutions that are the members of the Consortium of Creditor Institutions.

Upon the restructuring decision is established, a Financial Restructuring Contract will be signed by and between the borrower and the Consortium of Creditor Institutions. However, before this phase, it will be proper to mention “the Standstill Process” which starts with the application in due form.

  • Principles for the Standstill Process

Upon the borrower submits the application in due form and the application is shared with the relevant creditor institutions, “the Standstill Process” starts without being subject to any procedure.  It would be correct to define this process as a protection measure about the borrower. Such that, during this process, any enforcement proceedings shall not be conducted against the borrower by the creditor institutions for the receivables relevant to the Financial Restructuring, the current enforcement proceedings filed against the borrower shall not be resumed by the creditor institutions for these receivables, any new enforcement proceedings shall not be initiated against the borrower by the creditor institutions for these receivables and any other legal actions shall not be taken against the borrower by the creditor institutions for these receivables, with the exception of the cases that would cause a loss of right due to the statute of limitations and strict time limits.

The Parties shall, in general, pay attention to the maintain, comprehensively within the negotiation process, their existing legal status with the borrower, the collateral structure, the level of the relationship and the assets of the borrower and its shareholders.

The matter of whether or not “the Standstill Process” will continue shall be resolved at the first meeting of the Consortium of Creditor Institutions. In case no opinion is expressed at the first meeting of the Consortium of Creditor Institutions, it shall be deemed that the creditor institution’s opinion is positive, and the protection process shall continue.

As prescribed, there are certain exceptions of taking no action against the borrower. Accordingly; in result of the legal proceedings initiated against the borrower by a creditor institution prior to the borrower’s application, if such actions or steps have already been taken, i.e. in case:

1- a date for judicial sale has already been fixed;

2- a lawsuit for annulment of the tender is already pending;

3- an executory commitment has already been made for the debt;

4- a lawsuit for annulment of the transaction or possession is already pending;

these actions or steps will not be affected by the Financial Restructuring. However, the creditor institution(s) executing the above may waive thereof at their discretion. In the absence of the waiver, the matter of whether or not the Financial Restructuring process will continue shall be resolved by the creditor institutions representing at least two of the creditor institutions that are the members of the Consortium of Creditor Institutions and 2/3 of the total receivables of the creditor institutions that are the members of the Consortium of Creditor Institutions.

  • Signing and terms of the Financial Restructuring Contract

In accordance with the following conditions, a Financial Restructuring Contract will be signed by and among the borrower and the members of the Consortium of Creditor Institutions, and the other creditors (if any) that will be found acceptable by the members of the Consortium of Creditor Institutions, to be in line with the agreement terms. However, the Framework Agreement determines the items that each Financial Restructuring Contract should contain. Accordingly, each Financial Restructuring Contract shall contain:

1- the determination of the receivables owed by the borrower to each of the members of the Consortium of Creditor Institutions as of a certain date,

2- the determination of the maturity structure and amounts of the repayment obligations that shall be fulfilled by the relevant borrower within this context,

3- the determination of the cases creating a breach of the Contract and the sanctions relevant thereto,

4- the pricing method (interest, dividend, commission, etc.) applicable during the term of the Financial Restructuring,

5- the monitoring criteria (method, frequency, content, etc.),

6- the definition of the audit mechanism,

7- the power to examine all the accounts and documents of the borrower,

8- the collateral structure of the receivable within the process, both in general and separately for each member of the Consortium of Creditor Institutions, 

9- the determination of other obligations incumbent on the parties, and

10- any other matters that will be found appropriate by the Consortium of Creditor Institutions.

  • What is the way to be followed in case the creditor institutions do not fulfil their obligations arising from the Framework Agreement or the Financial Restructuring Contract?

A Panel of Referees, composed of three persons at least one of whom is a graduate of a faculty of law, will be constituted individually on the basis of the Consortium of Creditor Institutions and within the principles to be determined by the Board of Directors of the Banks Association of Turkey. The Panel of Referees shall have jurisdiction of the settlement of any disputes that might occur in case the creditor institutions do not fulfill their obligations arising from the Framework Agreement. The members of the Panel of Referees shall be elected from among the persons who completed their education in at least undergraduate level in economy, finance, banking, business administration, law, public administration or the equivalent sciences and have at least ten years’ profession experience in the field of banking or finance and are at a managerial position.

The Panel of Referees shall take its decisions preferably by unanimous vote, or in case the unanimity cannot be achieved, by the votes of at least two members in the same direction. The chairperson does not have a casting vote.

The Panel of Referees shall conclude the application in no later than 5 business days, and the decision taken by the Panel of Referees shall be put into effect by all the members of the Consortium of Creditor Institutions.

a- Financial Restructuring under the Small-Scale Implementation [3]

  • What are the application requirements?

It is implemented for the borrowers with total principal debts (cash + non-cash) owed to the creditor institutions in the amount less than 25 million Turkish Liras, as of the application date. The restructuring may be implemented as a whole or in part for a borrower or for the other borrowers in the risk group in which the borrower is included. In order to benefit from the scope of the Small-Scale Implementation, the application should be in conformity with the following requirements i.e. it is necessary that the applicant companies:

- are not declared bankrupt. In case the firm is declared bankrupt while the Financial Restructuring process is ongoing, the provisions regarding the default shall apply to the borrower.

  • How shall the application be submitted, and how will the application review process take place?

The documents, which are listed under the heading “Large-Scale Implementation” and are necessary to be made available and submitted at the time of the application, are the same for the Small-Scale Implementation as well. It is important to submit these documents completely and without any deficiencies at the time of the application so that the application is not rejected directly.

Differently from the Large-Scale Implementation; in the Small-Scale Implementation, the application should firstly be submitted to the largest creditor institution, or if the largest creditor institution does not accept the application, the application should be submitted to the creditor institutions on the second and third rank, respectively. If the creditor institution on the third rank does not accept the application either, the Financial Restructuring Process shall end before it started. In this case, in order for the re-submission of the application by the borrower whose application has not been accepted, it is necessary that six months have elapsed from the date of the first application.

The creditor institutions not accepting the borrower’s application shall, in no later than 5 business days, communicate in writing to the borrower the information that the application is not accepted.

However; the creditor institution accepting the application shall, in no later than 3 business days of the date it has accepted the application, furnish information to the creditor institutions which have receivables in line with the borrower’s declaration and are among the parties to the Framework Agreement, and request these creditor institutions to declare their receivables and their collaterals, if any, pursuant to the calculation to be made in compliance with the method determined in the same Agreement. In no later than 3 business days following this notification, the creditor institutions shall send a feedback to the creditor institution accepting the application.

The creditor institution accepting the application shall prepare the relevant feasibility report in no later than 15 business days of the date it has accepted the application. If needed by the creditor institution accepting the application, this creditor institution may extend this period for a further period of 5 business days. The acceptance of the application does not mean a commitment that a positive feasibility report will be issued or that an affirmative vote will be casted. Therefore, it is of importance to prepare the application documents and the request for restructuring properly, accurately and in compliance with the procedure.

The creditor institution accepting the application shall, in no later than 15 (+5) business days of the date it has accepted the application, communicate to the creditor institutions a preliminary proposal it has prepared for the structuring, which preliminary proposal shall contain:

1- the feasibility report it has prepared,

2- the maximum maturity for the repayment schedule,

3- the interest rate/type applicable, and 

4- the trade names of the creditor institutions which do not have signed the Framework Agreement, however, wish to be included in the Financial Restructuring Contract.

The creditor institutions shall declare to the creditor institution accepting the application their opinions on whether or not the structuring should take place on the basis of this preliminary proposal. If needed by the creditor institution accepting the application, this creditor institution may extend this period for a further period of 5 days. However; in case a feedback is not, within these periods, sent to the creditor institution accepting the application, it shall be deemed that the creditor institution which has not sent a feedback has delivered positive opinion.

About the preliminary proposal, in case the positive opinion is received from at least two creditor institutions and from the 2/3 majority with regard to the receivable amount; the creditor institution accepting the application shall, in no later than 10 business days, prepare a Financial Restructuring Contract within the scope of the structuring parameters we will explain below, and send the Contract to the creditor institutions for signature. In no later than 5 business days, the creditor institutions will sign the Financial Restructuring Contract transmitted to them and send it back to the creditor institution accepting the application. Thus, the Financial Restructuring process is concluded positively. However, the process shall terminate, if the required majority could not be achieved with regard to the positive opinion majority of at least two creditor institutions and the 2/3 majority for the amount of the receivable.

  • What are the structuring parameters prescribed by the Framework Agreement?

Differently from the Large-Scale Implementation, the terms that might be determined in a Financial Restructuring Contract are subject to certain parameters by the Framework Agreement. It will be a correct approach to furnish information about these parameters. It is prescribed that:

1- About maturity: The longest maturity related to the structuring period may be 60 months. It is essential to ensure full settlement and repayment of the structured loans at the end of the repayment schedule; however, it may also be in question for the maximum 25 percent portion of the total structured amount to be deferred to the period after the end of the repayment schedule.

2- About grace period: A principal payment-free and interest payment-free grace period may be granted up to maximum 12 months.

3- About installment frequency: It is essential for the installments to be monthly; however, it is possible to determine longer installment intervals, taking into consideration the fund creation possibilities on a sectoral basis. Nevertheless, it is essential to prepare a repayment schedule not to be, as a minimum, less than 10 percent of the total principal debt, every year following the grace period.  

4- About interest rate: The interest rate may be a fixed or a variable one depending on the customer’s choice.

5- About structuring currency: The structuring transactions shall be performed in TRY. 

6- About establishment of collateral: Structuring requests of the borrowers, who do not ensure provision of collateral or do not provide collateral, however, have available assets upon the application to the creditor institution accepting the application, shall not be accepted; and the collaterals shall be established on a pro rata basis in favor of the creditor institutions.

7- About making additional loan facilities available: It is not mandatory to make additional loan facilities available to the borrowers under the Financial Restructuring Contract. However, if deemed necessary after the Contract is signed, one or more than one of the creditor institutions may individually make additional loan facilities available to the borrower conditional upon compliance with the provisions of the Contract.

8- About debt writing-off/reduction: No debt writing-off/reduction transactions shall take place for the borrower requesting for structuring.

9- About acquisition of equity participation: This transaction shall not be performed either.

10- About revision of the repayment schedule: In the case that at least 10 percent of the total amount of the receivable structured has been repaid and that there is no delayed installment as per the repayment schedule, the revision of the repayment schedule may be evaluated, the revision transaction shall not be performed more than twice, the revised maturity shall not exceed 72 months in total, and the revision transaction may be performed under the positive opinion delivered by at least two banks and the 2/3 with regard to the receivable amount.

11- About non-cash loans:  The non-cash loans converted into cash shall be subject to the repayment schedule of the relevant creditor institution.

12- About the Structuring Commission:  In case the Financial Restructuring Contract is signed by the borrower; the commission, up to 1 percent of the structuring amount, not less than TRY 10,000.00 and more than TRY 50,000.00, shall be paid to the creditor institution accepting the application.

As mentioned above, in the Small-Scale Implementation, a detailed frame is drawn in respect of the structuring to be set forth in the Financial Restructuring Contract. Apart from these parameters, it is also possible to include a condition or a requirement into the structuring. However, in this regard, the Framework Agreement prescribes that, in case of an intention to perform a transaction other than those specified in the structuring parameters to be regulated, the implementation process specified in the Large-Scale Implementation shall be used under the positive opinion of at least two creditor institutions and of the 2/3 of the Framework Agreement signatory creditor institutions with regard to the amount of the receivable. Accordingly, it will also be possible to include into the structuring a condition or a requirement other than the parameters mentioned above.

It is also prescribed that, after the signing of the Financial Restructuring Contract prepared pursuant to the above parameters, in case the borrower is unable to continue performing its activities in result of the legal enforcement proceedings that have been or will be initiated by the other creditors which are not a party to the Framework Agreement, the circumstance “the inability to eliminate or remove these legal enforcement proceedings within 30 days” shall constitute the default of the borrower for the Financial Restructuring Contract. It is considered that, in this case, while carrying out discussions under the above-mentioned procedure with the creditors that are the parties to the Framework Agreement, it is also necessary to be in harmony with the creditors which are not the parties to the Agreement and that it would otherwise be no longer possible to find an opportunity to benefit from the Financial Restructuring process.

The topics we have explained in the chapter “Large-Scale Implementation” i.e.:

  • Principles for the Standstill Process,
  • Signing and terms of the Financial Restructuring Contract,
  • What is the way to be followed in case the creditor institutions do not fulfil their obligations arising from the Framework Agreement or the Financial Restructuring Contract?

apply to the Small-Scale Implementation as well.

As we have explained in detail above; the possibility of Financial Restructuring, which may be utilized by the companies affected due to the economic fluctuations being observed in our Country’s economy since 2018, is regulated as Large-Scale Implementation and Small-Scale Implementation. We are of the opinion that the companies, affected in economic terms due to the corona virus (Covid-19) outbreak in the current period, may also submit an application for Financial Restructuring since this is a possibility which may utilized by such companies in the long term.

References:

[1] https://www.mevzuat.gov.tr/MevzuatMetin/1.5.5411.pdf

[2] https://www.tbb.org.tr/fyy/FYY%C3%87A%20B%C3%BCy%C3%BCk%20%C3%96l%C3%A7ekli%20Uygulama.pdf

[3] https://www.tbb.org.tr/fyy/FYY%C3%87A%20K%C3%BC%C3%A7%C3%BCk%20%C3%96l%C3%A7ekli%20Uygulama.pdf


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