Turkey | Amendments to the regulation on the restructuring of debts owed to the financial sector

A number of amendments to the Banking Law No. 5411 (the “Banking Law“) concerning the restructuring of debts owed to the financial sector were introduced on 19 July 2019 (please refer to our Client Alert circulated on 26 July 2019). In order to comply with new modifications to banking law and further clarify such changes, the Banking Regulation and Supervision Agency (the “BRSA“) amended the Regulation on the Restructuring of Debts Owed to the Financial Sector (the “Regulation“) on 12 September 2019. Key highlights of the Regulation include:

• in line with changes made to the Banking Law, the definition of “Creditor institutions” now includes (i) non-resident banks and other financial institutions that have directly lent to a Turkish resident borrower; (ii) institutions and multinational banks that have directly invested in Turkey; and (iii) special purpose vehicles (companies) established by these institutions to collect receivables, and investment funds established for the same purpose;
   
• real estate investment trusts and venture capital investment trusts have been included in the definition of “Borrower” in compliance with the Banking Law;
   
• non-resident banks and other financial institutions that directly extended loans to Turkish resident borrowers, and multinational banks and institutions that directly invested in Turkey can join the framework agreement without being subject to creditor approval or any decision quorum;
   
• restructurings that have been conducted and performed before the entry into force of provisional Article 32 of the Banking Law shall not be taken into consideration within the scope of framework agreements made in accordance with the Regulation and the agreements issued in accordance with these framework agreements;
   
• the purpose of refinancing is to revitalise debtors’ capacity for the repayment of debts. Any refinancing measures (such as extension, installment, collateralisation, granting of additional loans) that are not performed with this objective in mind shall not be considered within the scope of the Regulation and shall not benefit from the tax advantages and the protection against embezzlement rules;
   
• the BRSA has been given the authority to request information and documents relating to financial restructuring transactions. Accordingly, the required information regarding the borrowers, the contracts signed and the transactions and developments made in this context shall be sent to the BRSA in the requested time and required form.

In compliance with Turkish bar regulations, opinions relating to Turkish law matters that are included in this client alert have been issued by Özdirekcan Dündar Şenocak Avukatlık Ortaklığı, a Turkish law firm acting as correspondent firm of Gide Loyrette Nouel in Turkey.

This client alert is not intended to constitute legal advice and should not be taken as a recommendation to take action or withhold from taking action.