On November 27, 2015, the Capital Markets Board (the
"CMB") published draft amendments to the current Debt
Instruments Communiqué (the "Draft
Communiqué"). Under the Draft Communiqué,
issuers will be required to demonstrate greater financial strength
than previously required or, alternatively, provide payment
guarantees. The Draft Communiqué is available on the
CMB's website for public comment until December 18, 2015.
What the CMB proposes
If the CMB adopts the Draft Communiqué in its current
form, new rules will apply to the domestic and cross-border
issuance of debt instruments:
An issuer must obtain a credit rating
for domestic debt issuances and maintain that rating for further
debt issuances under the same CMB approval.
An issuer will be required to provide
a bank guarantee for principal and coupon payments if: (i) its
credit rating is below the top three investment grades for public
offerings of debt instruments, (ii) its credit rating is below
investment grade for domestic debt instrument issuances to
qualified investors, or (iii) it has a fourth level investment
grade credit rating and its financial condition (in terms of net
profit, cash flow and equity) does not satisfy the thresholds as of
the application submission date for domestic debt instrument
issuances to qualified investors.
Only bank guarantees will be
permitted. Currently, non-bank parties can provide guarantees for
principal and coupon payments.
All issuers will be able to buy back
and sell their debt instruments on the secondary market, which is
currently limited to banks. Buy-back and sale prices will need to
be disclosed on the issuer's website.
Private placements of debt
instruments, which are not currently subject to a threshold, will
be required to have a nominal value of at least TRY 100,000 for
each private placement.
General assembly or board resolutions
in relation to debt instrument issuances will be required to be in
the CMB standard form, which has not yet been issued.
Issuers will not be required to
register their cross-border debt instrument issuances with the
Central Registry Agency (the "CRA"), i.e., the central
securities depository for dematerialized securities, and will only
be required to notify the CRA. Currently, debt instruments issued
abroad must be registered with the CRA.
If the upper limit of a multiple
issuance program is denominated in TRY for cross-border offerings,
the exchange rates for separate issuances within a program will be
recalculated at the current exchange rate just prior to each
issuance. Previously, the exchange rate for an offering program was
fixed for the entire program.
After obtaining a CMB-approved
issuance certificate, issuers will be able to offer cross-border
debt instruments by simply notifying the CMB electronically of each
issuance covered by the CMB certificate. The requirement to obtain
a physical CMB approved issuance certificate for each cross-border
debt instrument issuance within a program will be abolished.
The CMB is proposing to tighten the issuance of debt instruments
by introducing mandatory credit ratings and guarantees to protect
investors in the market. While the CMB is performing its duty to
protect investors, these requirements could reduce Turkish debt
offerings by disincentivizing companies in Turkey to issue debt
instruments. At the same time, the CMB is proposing to relax the
procedural requirements for cross-border debt instrument issuances,
allowing more Turkish issuers to seek debt financing abroad.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
Under Regulation (EU) No. 648/2012 of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories ("EMIR")...
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).