Video game industry

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

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 small businesses with loan debts below 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 concerning the commitment of the existing risk at maturity with regard to the conditions which will be determined according to the debtor, the liquidation of activities not directly linked to the principal activity of the debtor, the increase in capital, the change of management , the public offering, the sale of affiliated companies and assets, the modification of the corporate structure, the constitution of pledge and/or usufruct rights for the benefit of FRSC signatory creditors, the pro rata sale of the assets associates and first-degree relatives of the debtor petitioner to collateral creditor organizations if deemed necessary, enactment of all amendments
(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 debtors of loans who have a bankruptcy decree issued against them, companies whose principal debt is less than TL 100 million in cash and non-cash, will be able to apply to banks which are the creditor organizations.

Make a request ;

Loan debtors will be able to apply to one of the three largest creditor organizations that have signed the framework agreement, and if the largest creditor organization to which the first application is made is rejected, the second and third creditor organizations can be forwarded to . Ultimately, if the third creditor agency does not accept the request either, the restructuring process will be over before it has even begun.

Three months must have elapsed from the date of the first request, so that the debtor can present a new request if his first proposal is rejected.

The evaluation of the candidacy;

If the application is accepted, the process will be carried out by the creditor organization which accepted the application and this institution will transmit the preliminary offer concerning the restructuring, which contains a feasibility report analyzing whether the debtor will obtain the means to repay the debts to as the result of the review process of the internal and external balance sheet of the assets and capacities of the debtor in question, the most distant possible maturity concerning the payment plan, the rate/type of interest that will be applied as well as the names of the Creditor Organizations that have not signed the framework agreement but wish to be included in the FRSC.

The FRSC will be signed with the approval of a 2/3 majority of the amount of the claim, and the consent of at least two creditor organizations; if the majority is not reached, the process will end.

Restructuring parameters to consider;

The bank which is the creditor organization which accepts the request will prepare the FRSC while respecting the parameters of “expiration and grace period, payment frequency, interest rate, restructuring currency, posting of collateral, additional loan disbursements, payment plan review, non-cash loans and restructuring fee” included in the texts of the financial restructuring framework agreement. Parameters such as debt cancellation/reduction and participation will not be questioned.

If a transaction other than the parameters listed is desired to be executed, the implementation process specified in the full-scale application may be used with the consent of 2/3 of the majority of creditor organizations that have signed the agreement- framework in terms of debt and the agreement of at least two creditor institutions.

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 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 accepted 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.

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.

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.

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

THE REFERENCES:

FRS Framework Agreement of Turkish Bank Association Small-Scale Implementation – 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.