Major Changes To The Framework Financial Restructuring Agreements

Recent development

In July 2021, the Turkish Banks Association (TBA) amended the framework financial restructuring agreement for large-scale debtors ("Large-Scale FA") and the framework financial restructuring agreement for small-scale ("Small-Scale FA") debtors. Please refer to the following links for our alerts on the development on the Turkish framework financial restructuring agreements:

• New Financial Restructuring Framework Agreement for SMEs - Esin Attorney Partnership
• Material Changes to Financial Restructuring - Esin Attorney Partnership
• Amendments to Financial Restructuring Framework Agreement - Esin Attorney Partnership
• Significant Amendments to Financial Restructuring - International Banks Back in the Game! - Esin Attorney Partnership
• Turkish Financial Restructuring - International Banks Back in the Game! - Esin Attorney Partnership
• Framework Agreement on Financial Restructurings Entered into Force - Esin Attorney Partnership

What's new?

• The TRY 25 million-aggregate principal financial debt threshold is now increased to TRY 100 million. Accordingly, while the Large-Scale FA will be applicable to the restructuring of the financial obligations of the debtors with an aggregate principal financial debt equal to or more than TRY 100 million, the Small-Scale FA will be applicable to the restructuring of the financial obligations of the debtors whose aggregate principal financial debt is under TRY 100 million.
• Additional collateral must be established in favor of all creditor financial institutions, unless those which will not benefit from the collateral approve the grant of such collateral to other creditors. In case of the Large-Scale FA, the approval of creditors who will not benefit from the collateral will not be sought if additional collateral will secure any additional loan to be granted to the debtor.
• The amendments enable certain creditors, whose aggregate share is below the threshold to be with the affirmative vote of at least two creditor institutions representing at least two-thirds of the claims, to benefit from a payment plan which is different from the general restructuring plan.
• There are certain amendments which are made exclusively to Large-Scale FA, pursuant to which the interest rate can be determined upon the affirmative vote of the more than one creditor institution representing at least two-thirds of the total claims to be restructured. However, an interest rate below 75% of the TLREF rate applicable as at the date of the debtor's financial restructuring application can be applied upon the affirmative vote of more than one creditor institution representing at least 90% of total claims to be restructured and the voting for decisions other than those on special topics such as release of collaterals, extension of additional loans and debt write-off must be completed within 10 business days.
• Amendments to Large-Scale FA provide: (i) additional 180 days for concluding the ongoing financial restructuring negotiations under the Large-Scale FA; and (ii) additional 60 days for debtors, the term of whose financial restructuring applications has expired since 1 March 2020 to complete their negotiations under the Large-Scale FA.
• The restructuring parameters such as maturity, grace periods and interest rates applicable to Small-Scale FA have been updated. Fixed or floating interest rates can be determined pursuant to the preference of the debtors.

Conclusion

After two years of intense financial restructuring efforts, it is now time to update the framework agreements to ensure that they follow the practices the market has developed in this period.