Debt Assumption Agreement Turkey

Debt Assumption Agreement Turkey

The Public Financing Act stipulates that debt relief may be partial or complete, without giving further indications. The regulation provides that the assumption of the debt covers 85% of the financing in case of termination due to the fault of the project company and 100% of the financing in case of termination for another reason and 100% of the financing costs. The resumption of external debt by the Ministry of Finance was first introduced in 2010 for some public bodies. By amending the Public Finance Act 4749, it was then extended to construction-operating-transfer (BOT) projects and operating credit transfer (BLT) projects exceeding a certain threshold. In the event of early termination of the implementation agreement under a BOT or BLT project, the Ministry of Finance may therefore take over the remaining financial commitments of the project company, either in part or in full, including derivatives. To be able to take over debts, the minimum amount of investment must be TRY 1 billion in BOT projects (approximately $465 million) and 500 million TRY ($232 million) in BLT projects. Under the Regulation, the scope, limits and terms of payment of financial liabilities subject to debt management, including those resulting from derivatives for obtaining such financing, have been defined. In addition, the following conditions must be met to enable the Ministry of Finance to take over the assumption of the debt: (i) the competent authority should not have a outstanding commitment to the public treasury, (ii) debt management should remain within the ceiling of the debt recovery commitment for the year in question; (iii) the project agreement should clearly address the recovery of the debt and contain certain provisions of the regulation. Debt support can cover unpaid interest payments (by contract and contract) if the shareholders of the project company grant the public treasury a joint and multiple guarantee of an amount that is not less than the highest rate payable under the loan agreement, plus 10%. The Ministry of Finance and the Council of Ministers must approve the extent and conditions of the debt management, which will then be part of the tendering process. The regulation expressly provides that debt recovery agreements will not be published in the Official Journal, which has caused some controversy. In response to the criticism, the Ministry of Finance issued a press release in which it stated that the disclosure of the debt acceptance terms would jeopardize its negotiating position for future projects.

(iii) The positive opinion of the public treasury must have been obtained on the debt recovery clauses in the implementation agreement prior to the publication of the tender documents and prior to the implementation of the implementation agreement. As part of an attempt to increase the banking capacity of major projects, the government cancelled a regulation (1) on the acceptance of foreign debt by the Ministry of Finance. This should help overcome the financial problems associated with major energy and infrastructure projects such as the third bridge in Istanbul and public-private health partnership projects, which are being implemented in different cities.

Comments are closed