Following, and pursuant to, the BRSA Regulation on Restructuring of Debts Owed to Financial Sectors numbered 30510 published in the Official Gazette dated August 15, 2018 (the Regulation), Turkey’s Banking Association (the TBA) prepared a framework agreement which Turkish banks and financial institutions signed on September 11, 2018 (the Framework Agreement).
The Framework Agreement sets out the terms and conditions applicable to refinancing and/or restructuring of debts payable to banks, financial leasing, factoring and financing companies, aiming to help businesses having difficulty in debt servicing, and includes material terms and conditions relating to the financial restructuring; eligibility criteria which must be met by the borrowers; scope and value thresholds of receivables to be restructured; main obligations of the parties concerned; events of default under the framework agreement; termination events and effects under individual restructuring agreements; and material elements to be included in and the scope of obligations to be governed by the restructuring agreement.
Implementation of the Framework Agreement depends on the subsequent execution of agreements to be signed with borrowers whose debts are restructured. In order to be valid, such restructuring agreements must be executed within two years of the approval of the relevant Framework Agreement by the BRSA.
Debtors who demand a restructuring will be subjected to an assessment to make sure that they will regain the ability to repay the outstanding debt after such restructuring or repayment plan. Those who are assessed to be unfit to pay their debts upon restructuring or repayment plan shall not be eligible for a restructuring. This assessment will be made by an independent institution specified under the Framework Agreement and approved by the BRSA. Approval by two thirds of creditor institutions is sufficient for the restructuring of the outstanding debts of a borrower, which will force all creditors to agree to restructure the debts concerned.
According to the Framework Agreement, only borrowers whose principal of the debt (cash and non-cash) is –at the time of application for a restructuring- greater than 100 million Turkish Liras (US$15.9 million ) will be eligible for a financial restructuring. Debtors within a risk group may take part in a restructuring as a whole or partially.
In its statement on September 19, 2018, the TBA announced that banks and financial institutions that have signed the agreement account for 90 per cent of the outstanding loans, with the remainder expected to sign shortly.