Framework Agreements on Financial Restructuring

On October 14th, 2019, the Banks Association of Turkey (“TBA”) have published the “Public Announcement on Implementation of Framework Agreements on Financial Restructuring1” in its website and with the announcement, it has been stated that the “Financial Restructuring” (“FR”) has been initiated for large-scaled companies with debts of more than 25 million TL to banks and financial institutions, and large scaled companies can benefit from the newly launched Financial Restructuring Implementation. With this implementation, it is aimed to give opportunity to corporations that intended to pay their debts but could not because their income-expense balance is deteriorated in order to fulfill their repayment obligations.

Purpose and Implementation of Financial Restructuring

In accordance with the Provisional Article 32 of Banking Law No:5411 (“Banking Law”) published in Official Gazette dated October 19th, 2005 repeated numbered 25983, the Implementation of Restructuring enables the borrowers in credit relations with banks, financial leasing companies, factoring companies and financing companies to fulfill their repayment obligations and to continue production, investment and employment activities, and measures to be taken under the framework agreements which would allow economic growth.

In accordance with the Provisional Article 32 of Banking Law; the procedures and principles regarding financial restructuring transactions to be executed pursuant to this article will be determined and regulated by Framework Agreements to be prepared in accordance with the provisions of the Regulation on the Restructuring of Debts to the Financial Sector published in the Official Gazette numbered 30510 dated  August 15th,  2018 (“Regulation”) issued and enacted by the Banking Regulation and Supervision Agency. The provisions of this article shall be applied for a term of two years following the date this article is promulgated and the President is authorized to extend this period of time for additional two years.

  • Issues on Financial Restructuring

  • By the Framework Agreement on Financial Restructuring-Large Scale dated October 9th, 2019 (“Framework Agreement”)2; large-scale companies with debts of 25 million TL or more to banks and financial institutions will be able to benefit from the FR implementation. Corporations that have debts less than 25 million TL can benefit from such application after obtaining an approval.
  • The debtors that declared bankruptcy shall in no case be included within the scope of FR. If a company declares bankruptcy during its process of FR, the default provisions shall be applicable for the Debtor.
  • In order to benefit from FR implementation, it is required to determine that the debtors to be included within the scope of FR will be able to repay their debts if their financial situation, and accordingly, their debts are restructured or are rescheduled under a new repayment plan. Borrowers that are determined to have the ability to repay their debts and have not initiated legal follow-up procedures by any creditor organization will be able to benefit from the FYY implementation.

  • Determination of the financial situation of debtors to be included within the scope of financial restructuring, and assessment as to feasibility of financial restructuring will be assigned to independent audit firms, or to institutions having adequate knowledge and expertise as designated and appointed by Creditor Institutions representing 2/3 of the receivable amounts or by at least two of the Creditor Institutions which have signed the Framework Agreement, or to the Creditor Institutions themselves if accepted by the debtor.

  • Principles for Implementation Process

The debtors eligible for inclusion in the FR process shall be able to file an application to any one of the first three Creditor Institutions having the highest amount of receivables, by submitting an Application Form and a Letter of Undertaking in accordance with the format designated in the annex of this Framework Agreement, accompanied by all other information and documents required by the process. The Creditor institutions that have signed the Framework Agreement are to be announced by the Banks Association of Turkey and the list shall be updated upon every new participation. In accordance with the Provisional Article 32 of the Banking Law, the qualifications of the creditor institutions have been specified as follows “banks mentioned in article 3 of this Law, and companies mentioned in article 3 of the Financial Leasing, Factoring and Financing Companies Law no. 6361 dated 21/11/2012, and banks and financial institutions seated abroad which have directly made loan facilities available to borrowers, and  multilateral banks and institutions which make direct investments in Turkey and special purpose vehicles and companies to be founded by these creditors for collection of receivables, and investment funds founded for the same purpose according to the Capital Markets Law no. 6362 dated 6/12/2012”  As per to this article, institutions having signed the Framework Agreement have been published on TBA website, and relevant list can be found on the website 3.

Upon submission of a proper application to the Creditor Institution of Application, and sharing the application with the relevant Creditor Institutions, the “Standstill Process” shall commence without any further step or procedure whereas Creditor Institutions that have signed the Framework Agreement cannot initiate execution proceedings against the debtor, and except for the events that may lead to loss of rights due to statute of limitations or forfeiture, cannot continue the ongoing proceedings or cannot commence new execution proceedings nor apply other legal remedies.

However, as a result of legal proceedings commenced by any Creditor Institution at any time prior to the date of application of the Debtor, these transactions shall not be affected by the FR if the sale date is determined, the lawsuit of the termination of the tender is pending, the debt is subjected to the execution commitment, and the lawsuit on cancellation of the disposals is pending. The Panel of Referees appointed by the Board of Directors of the Banks Association of Turkey shall be entitled to resolve the disputes arising from the non-fulfilment of the obligations under the Framework Agreement by the Creditor Institutions.


Aslı Kınsız, Associate

[1] Public Announcement on Implementation of Framework Agreements on Financial Restructuring

https://www.tbb.org.tr/Content/Upload/Dokuman/7625/14102019.pdf

[2]  Framework Agreement on Financial Restructuring

https://www.tbb.org.tr/Content/Upload/Dokuman/7551/cerceveanlasmasi.pdf

[3] https://www.tbb.org.tr/tr/bankacilik/duzenlemeler/finansal-yeniden-yapilandirma-cerceve-anlasmalari/4489

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