Within the framework of the Regulation on Restructuring of Debts Owed to Financial Sectors numbered 30510 ("the Regulation") published in the Official Gazette dated 15 August 2018 by the Banking Regulation and Supervision Agency ("the Agency"), the way has been paved for restructuring of some debts payable to banks, financial leasing, factoring and financing companies (collectively "the Creditors"). Procedures and principles to be followed for rescheduling of loans granted to the debtors who are considered able to recover their financial means for repayment, and precautions to be taken in this regard, have been announced for the purposes of facilitating employment and performance of repayment obligations within the scope of loans provided by the Creditors. In this connection, the Banks Association of Turkey ("the Association") shall draw up a framework agreement which shall further be approved by the Agency, and executed by the Creditors. Within two years as from the date of the framework agreement, eligible debtors and the Creditors may conclude debt restructuring agreements.

Scope of the Restructuring

As per Article 4 of the Regulation, the following may be carried out with respect to the receivables of the Creditors:

  • to reschedule due dates of loan instalments,
  • to renew loans,
  • to grant additional loans,
  • to partially or wholly discount, or waive principal loans, interests, default interests, and/or other receivables arising from the loans;
  • to convert loans into shares,
  • to transfer, dispose, sell such receivables, or to exclude them from balance sheets in return for any amount in kind, in cash, or on a condition of collection of the debt;
  • to covenant with other banks, and/or creditors.

In evaluation of their eligibility, the debtors will undergo a financial scrutiny in order to ensure their ability to recover financial means for repayment through restructuring. The debtors who are identified unable of such recovery shall not be entitled to the restructuring. This assessment will be made by an independent establishment to be assigned by the Agency.

Term of Application and Restructuring Agreements

Pursuant to Article 5 of the Regulation, it is a prerequisite for validity of restructuring agreements to have been executed by and between the Creditors and debtors within two years as of signature date of framework agreements. Furthermore, compulsory execution of a confidentiality agreement has been introduced along with the restructuring agreements due to confidential information bearing the quality of costumer secret.

Matters to be Regulated by Framework Agreements

In framework agreements, processes, procedures and principles of the debt restructuring; violations, rights and obligations of parties, the Creditors and debtors; criteria for eligibility of debtors and minimum content of restructuring agreements shall be determined in accordance with Article 7 of the Regulation. Following these developments, an arbitration committee is created by the Agency for settlements of disputes arising from the restructuring agreements. The framework agreements are designated for execution of the Association and the Creditors, however, shall enter into force following their approval by the Agency. The Association is also authorised for classification of debtors of different nature with respect to their sectors and scale, and for drafting separate framework agreements accordingly.

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.