The Council of Ministers has recently issued a Regulation on
Liability Undertakings to be Performed by the Undersecretariat of
According to the Regulation, (i) build-operate and transfer
projects with a minimum investment amount of TRY 1,000,000,000 and
(ii) build-lease and transfer projects with a minimum investment
amount of TRY 500,000,000 ("Projects")
can now benefit from the liability undertaking which will be
provided by the Undersecretariat of Treasury
The first step towards this liability undertaking was taken
during the acceptance of the Budget Law for the Year 2014
("Budget Law"). According to the Budget
Law, the limit for the Undersecretariat to provide a liability
undertaking has been determined as USD 3,000,000,000.
The Regulation provides that the Undersecretariat will act as
guarantor of the borrower companies and compensate the creditors in
case the borrower company defaults on the loan from the creditor to
finance the project.
In order to benefit from this liability undertaking, the
shareholders of that company will need to provide a joint and
several surety to the Undersecretariat which needs to be at least
%10 higher than the highest installment under the payment plan
agreed between the borrower and the creditor.
For example, if the highest installment under the payment plan
is USD 50,000,000, then the surety to be provided by the
shareholders to the Undersecretariat will have to be USD
Moreover, the Regulation provides that the following conditions
must be met in order to benefit from this liability
The agreement executed between the company and the relevant
administration regarding the Projects must contemplate that (i) the
agreement shall be terminated prior to the end of its term, (ii)
the facilities subject to the agreement shall be transferred to the
relevant administration and (iii) that the loan should be assumed
by the Undersecretariat;
The administration requesting the liability undertaking shall
have no overdue liabilities before the Undersecretariat; and
The limit of liability undertaking set forth for that year has
not been exceeded
As mentioned above, the limit of undertaking for 2014 has been
set as USD 3,000,000,000. This being said, the Regulation provides
that the Council of Ministers is authorized to increase this limit
up to USD 6,000,000,000.
Finally, it is important to note that the tenders which have
been announced before January 01, 2014 will be exempted from the
abovementioned monetary limit.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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