Restructuring by Settlement
The mechanism in Enforcement and Bankruptcy Law (İİK) Art. 309/m et seq. is regulated for capital companies and cooperatives that cannot pay their matured monetary debts or that face a risk of non-payment in view of their existing and expected cash flow. Court confirmation is requested on the basis of the required majority of the creditors affected by the project, the project, the financial analysis, the assets and liabilities, and the statutory documents.
This route is not a short form of composition with creditors (konkordato). The concept of the affected creditor, voting groups, negotiation before filing, interim measures, the conditions for confirmation and the implementation of the project are assessed under their own provisions. It is not chosen without comparing it with an out-of-court protocol or a composition, taking into account how intensive its application is and the concrete creditor structure.
Legal Work That Can Be Carried Out on This Subject
Out-of-Court Bilateral Debt Restructuring
The options of extending the maturity with a creditor, a grace period, a change of interest, installments, partial payment, renewal of security, waiver, settlement and replacing the debt with another debt are negotiated.
In the protocol, the acknowledgment of the debt, waiver of objections, acceleration, enforcement, continuation of security, sureties, taxes, costs, confidentiality and the rights after default are regulated clearly. It is not assumed that signing an installment plan ends all past or future disputes.
Multilateral Standstill and Negotiation Protocols
Where there are several creditors, standstill, information sharing, equal treatment, new money, payment prohibition and negotiation principles are prepared to regulate enforcement and security actions for a set period.
The rights of creditors that do not join the protocol and their possible enforcement are managed separately. The standstill period is used as a period for preparing a verifiable plan; it is not a window for correcting records or transferring assets.
Restructuring of Bank Debts
Loans, revolving limits, non-cash risk, letters of credit, letters of guarantee, financial leasing, factoring and derivative transaction debts are examined together with their contracts and security.
The cash flow, business plan, payment capacity, security package, shareholder support and information undertakings to be submitted to the bank are brought into line with the legal texts. The cross-default, additional security, account control and information provisions of the new contract are negotiated.
Framework Agreements for Financial Restructuring
We examine whether the debtor and the creditor financial institutions fall within the scope of the large-scale or small-scale framework in force, the route of application and the structure of the consortium. The effects of the framework agreement and of the debtor-specific financial restructuring contract are kept apart.
Because the process can address only the debts to financial institutions, a parallel plan is built for suppliers, public bodies, employees and other market debts. The current thresholds and the list of signatory institutions are verified, as of the filing date, from the sources of the Banks Association of Türkiye and the Banking Regulation and Supervision Agency (BDDK).
Designing the Maturity, Interest, Discount and Payment Offer
A grace period, increasing or decreasing installments, seasonal payments, balloon payments, the type of interest, currency conversion, a partial discount and early payment conditions are structured to fit the cash generation.
The economic result of the offer for each class of creditors is compared with the likely recovery in bankruptcy or liquidation. Not only the payment amount but also the source of payment, the date, the supervision and the consequence of default are determined.
New Financing and Working Capital
The new money needed during the restructuring, shareholder financing, bridge loans, order financing, assignment of receivables and asset-based financing options are examined.
The security and priority of the new financing, the interest of the company, the effect on ownership, the permission of the commissioner or the court and the restrictions in the existing contracts are assessed. New resources are not used to hide an unsustainable business model that enlarges the past deficit.
Rebuilding the Security Package
Mortgages, pledges over movables, pledges over a commercial enterprise, pledges over shares, account pledges, assignments of receivables, suretyships and the guarantee arrangement are prepared in line with the restructuring conditions.
The value, ranking, scope and registration of the security, third-party approval, the interest of group companies and the conditions for realization are examined. The release of existing security or the creation of new security is made subject to clear conditions for all the parties concerned.
Debt-to-Equity Conversion and Shareholder Support
The options of converting a claim into equity, a capital increase, a share transfer, preferences, convertible financing and re-ranking the shareholder’s claim are addressed together with company law and tax effects.
The requirements of valuation, share ratio, management rights, dilution, exit, minority rights and competition clearance are examined. Shareholder support is not left as a statement of intent whose source and payment conditions are unclear.
Sales of Assets and Business Units
The sale of real estate, machinery, inventory, an affiliate, a trademark, a license, a customer contract or a business unit is assessed in terms of the cash need, continuity and the value to creditors.
Authority, valuation, related parties, pledges, tax, transfer of employees, assignment of contracts, competition and the requirements of the commissioner’s or the court’s permission are examined. The risk of a hasty sale and of a simulated transfer or a transfer of value below the market price is prevented.
Protocol Check Before Signing
Besides the extension of the maturity, the acknowledgment of the debt, the waiver of objections, cross-default, new security, the surety’s consent, costs and the consequences of breaching a single installment are examined together. No protection against enforcement arises automatically against creditors that do not join.
Scope in financial restructuring
The current period of application of the framework agreement of the Banks Association of Türkiye, the conditions for the debtor and the signatory institutions are checked as of the date of the file. Negotiations with banks do not place all employee, public and market debts under the same regime. The financial model and the tax effects are coordinated with the relevant professionals.