• It is the spirit and not the form of law that keeps justice alive.
    Earl Warren

RECENT DEVELOPMENTS REGARDING DEBT INSTRUMENTS AT TURKISH CAPITAL MARKETS

Capital Markets Board of Turkey (“CMB”) has introduced its Amendments on the Communiqué on Debt Instruments Serial No. II-31.1a on 18 February 2017 with the Official Gazette numbered 29983 (the “Amendment”). The Amendment aims to ease the debt instrument issuance process and provides, amongst others, the following changes: 

The Amendment clarifies the term ‘note’ (bono) by changing the term to ‘financing note’ (finansman bonosu) and the repayments for the financing notes and bonds (tahvil) to be made in installments until the maturity.

The Amendment separates the domestic and cross border issuances more clearly and distinguishes the domestic issuances as (i) the sale through public offering, (ii) private placement (without offering the debt instruments to the public) and (iii) sale through private placement to the qualified investors.

The Amendment brings a threshold of TL 100,000 for the minimum nominal value in relation to the domestic issuances made through private placement.

The Communiqué on Debt Instruments Serial No. II-31.1 published in the Official Gazette dated 7 June 2013 and numbered 28670 (the “Communiqué”) used to provide a right to request exemption from the requirement of registration to the Central Registry Agency (CRA) for the cross border issuances. However, this provision is abolished by the Amendment.

Article 4 of the Communiqué which entitles CMB’s involvement such as request of guarantee for the payments by the issuers, is amended in a way to broaden the CMB’s authority. For instance, CMB is now entitled to determine the qualifications of the targeted investors, request limitations in the sale conditions or reduce the issue period referred in the issuance certificate.

The Amendment improves the layout of the article which provides corporate authorization for the issuers. In brief, a general assembly decision or board of directors’ decision is required. It must be noted that the board of directors has to be authorized by a general assembly decision or through the articles of association of the issuer.

The Communiqué used to entitle CMB to take into account the issuer’s previous year’s financials in order to determine the issue limits. In the Amendment, a detailed table which shows the financials to be reviewed in accordance with the application date is provided.

The Amendment enables early redemption upon request of the issuer or the investor provided that the rules and principles on early redemption are provided in the prospectus or other relevant issuance documents.

The Amendment allows all issuers to re-purchase the bonds, while in the previous version of the Communiqué, the banks were exclusively allowed to re-purchase the issued bonds.

The Amendment provides exemption for the public private projects (PPP) in relation to the issuance limits. In terms of the issuances outside Turkey, only for the purposes of financing or re-financing the projects or businesses established for fulfillment of the investment and services within the scope of the Law on Procurement of Some Investment and Services within the framework of the Build-Operate-Transfer Model dated 8/6/1994 and numbered 3996 and Law on Building and Renewal of the Facilities and Procurement of Services by the Ministry of Health through Public Private Partnership Model No. 6428 dated 21/2/2013 as included by the Amendment; the issuance limits shall not be applicable.

The Amendment also clarifies that in case there is no explicit provision for the convertible bond (“PDT”) and exchangeable bonds (“DET”) in their respective provisions of the Communiqué, the general provisions for the bonds shall be applicable. In addition, if there is cross border issuance or domestic issuance without offering to the public, upon issuer’s request and subject to CMB’s approval, different principles may also be applicable for the issuances of PDT or DET. As a result, it seems that the issuance processes of PDT and DET will become easier in comparison to the previous application.

The Amendment states that the provisions for issuances of PDT in the Communiqué shall not be applicable in case of bond issuances by the banks that would be included in the equity calculation (subordinated). The principles for these types of issuances shall be determined by CMB.

The Amendment reduces the board application fee from 0.2% to 0.15% for the issuances with maturity periods longer than 730 days.

Practice Areas:
#Capital Markets Law
Other Articles