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Legal Alerts
11/09/2021 https://www.esin.av.tr/wp-content/themes/esin/images/esin.jpg

Amendments to Financial Restructuring Framework Agreement

Legal Alerts
Banking & Finance
General

Recent Development

Amendments to the Financial Restructuring Framework Agreement (the “Framework Agreement“), which was drafted by the Turkish Banks Association (the “TBA“) within the scope of the Regulation Regarding the Restructuring of Debts Owed to the Financial Sector (the “Regulation“), were distributed to banks and other financial institutions to be executed.

The Banking Regulatory and Supervisory Authority had amended the Regulation, on November 21, 2018 to pave the way for international banks to become a party to the Framework Agreement setting forth that the Framework Agreement would determine the related principles and procedures.

The TBA’s amendments aim at reflecting the recent changes to the Regulation into the Framework Agreement.

What’s New?

  • Foreign credit institutions will be able to become parties to the Framework Agreement on a debtor basis by delivering an executed copy thereof to the leader bank.
  • Foreign credit institutions are credit institutions and international organizations that are authorized to lend under the laws of the jurisdiction where they are resident.
  • If, during the negotiations of the financial restructuring agreement (the “Restructuring Agreement“), creditors that are not parties to the Framework Agreement initiate legal proceedings against a debtor for an amount exceeding 25% of the relevant debtor’s aggregate debts and such proceedings are not terminated within 30 days, the financial restructuring negotiations can be ceased with the affirmative vote of the creditors that (i) own a minimum of 75% of the claims subject to the Framework Agreement, and (ii) represent a minimum of 30% of all creditors that are parties to the Framework Agreement (the “Consortium Quorum“). If the negotiations are not ceased, each creditor will be able to walk away from the negotiations.
  • If, during the term of the Restructuring Agreement, creditors that are not parties to the Framework Agreement initiate legal proceedings against a debtor and such proceedings are not terminated within 30 days, the Restructuring Agreement can be terminated or revised with the Consortium Quorum. Otherwise, each creditor will be able to individually terminate the Restructuring Agreement.
  • In case of additional borrowing to the debtor, the proceeds of the enforcement of the securities provided for such additional loans will be used to repay the additional loans. The parties of the Framework Agreement that chose not to provide additional loans to the debtor will not be prioritized for any payment from the proceeds of such securities or other collections under the Framework Agreement.

Conclusion

The amendments introduce new material features such as foreign credit institutions’ participation in financial restructuring on a debtor basis and creditor institutions’ ability to cease the negotiations or terminate the Restructuring Agreement in case of third party enforcement against the debtor.