THE BANKS ASSOCIATION OF TURKEY

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THE BANKS ASSOCIATION OF TURKEY

• FRAMEWORK AGREEMENT ON FINANCIAL RESTRUCTURING
  PROGRAM
• PRESENTATION
• BY
• WORKING GROUP
• ON FINANCIAL RESTRUCTURING
• May 24, 2002

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FRAMEWORK AGREEMENT ON FINANCIAL RESTRUCTURING
PROGRAM
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Creditor Institutions Supporting Organizations
in the Agreement

• Saving Deposit Insurance Fund (SDIF)
• BAT member banks
• Special Finance Institutions (SFI)
• Emlak Bank of Turkey in Liquidation Process
• Other Financial Institutions

CREDITOR ORGANIZATIONS

• Union of Chambers and Commodity Exchanges of
  Turkey -UCCET (TOBB)
• Turkish Industrialists Businessmens
  Association-TIBA-(TUSIAD)

SUPPORTING INSTITUTIONS
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Purpose of the Agreement

1. Following the financial restructuring, the
   achieving ability of efficient working of the
   producer firm, hence creating a favorable
   business environment for small and medium size
   enterprises, which are suppliers and buyers,
2. Ensuring that both the corporate sector and the
   financial sector institutions have regular, sound
   and transparent balance sheets through compliance
   with the arrangements based on the provisions of
   the Agreement hereby,
3. Providing the firms that have the capacity to add
   value in the corporate sector become effective in
   the economy, increasing the capacity utilization,
   improving the national welfare through increasing
   production and employment.

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Definitions

• Large Size Firms
• Employing permanently gt 100
• Annual export gt 15.000.000
• Annual turnover gt TL 25 trillion
• The assets in the audited balance sheet gt 15
  trilyon TL

On the condition that having capacity to add
value to the economy, the firms who will satisfy
at least two of the mentioned criteria and
produce risks for financial sector at an amount
more than USD 10 million shall be concerned as
Large Size Firms
Medium and Small Size Firms The firms and groups
of firms except for the criterias defined for
Large Size Firms
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Framework AggreementGeneral Quarum Conditions
Arbitration Commitee (Large Size
Firms) No Yes (55-75 )
Decision Acceptance Rate 90 75
Provisioning Regulations
Loan Classifications 1st GroupLoans-Standard
Performing 2nd GroupLoans-Under Special
Follow-Up 3rd GroupLoans-Limited
Collectibility 4th GroupLoans-Collectibility
Uncertain 5th GroupLoans-Uncollectable
Classified Date Jan 31th, 2002 Prerequisite As
of Jan 31st, 2002 categorized in any of these
3 categories at any bank
P.S. In the following slides, process is
presented according to 75 rule. If the related
company that will be included in the FRP, is not
classified in any of the 3rd, 4th or 5th
categories at any bank then for the rest of the
presentation, the ratio stated as 75 must be
taken into consideration as 90 and it must be
taken into account that for large scale companies
it will not be possible to apply for the
Arbitration Committee.
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Organisational structure
ARBITRATION COMMITEE (For large scale firms 3
persons appointed by the Board of Directors of
BAT and BRSA observer
COORDINATION SECRETERIAT 1 coordinator and
sufficient number of technical and administrative
staff appointed by Board of Directors of BAT
CONSORTIUM OF CREDITOR BANKS
FIRM SUBJECT TO FINANCIAL RESTRUCTURING
LEADER BANK
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Process (For Large Size Firms)
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One of the 3 banks who has the biggest risk can
initiate the process
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The bank who initiates the process, shall receive
the letter of undertaking from the company and
apply to the CS in two business days
Second CBC meeting are held two days following
the first meeting. after the within 2 days in the
second CBC meeting, if necessary, rules of
standstill process shall be identified
CS inform other creditor banks and invite all
banks and the company to the first meeting

• In first CCB meeting ()
• -CCB members shall be identified
• Leader bank shall be identified
• Agenda of negotiation process shall be identified
• Conditions are reviewed and working plan is
  prepared

1-b
Small creditor banks who own 25 of total risk
can apply for one of the 3 big creditor banks to
initiate the process
() CCB Consortium of Creditor Banks
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Process (For Large Size Firms)
For subjects of disagreement Apply to AC
through CS, AC get written opinion of sides,
announce decision within 5 days. This decision
will be put in practice by CCB
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Apply for Arbitration Committee
CCB agreement between 51 - 75
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CS and through CS BRSA are informed.
Full agreement with the firm
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• Negotiation process
• Between CCB and company
• Among CCB members

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FR contract signed
CCB agreement more than 75
Monitoring process
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No agreement with the firm
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Financial Restructuring IMPOSSIBLE
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CCB agreement less than 50
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Process (For Medium Small Size Firms)
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• In first CCB meeting
• CCB members are defined
• Leader bank is decided
• Conditions are reviewed and working plan prepared
• Consultation process agenda is defined

Second CCB meeting Within 2 days in the second
CCB meeting, if necessary, rules of standstill
process are defined
At least two banks who represents 51 of total
risk come together to start the process
Banks who initiate the process, get the
commitment letter from the firm and give
application to CS in two business days. In this
situation will start the process
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Process (For Medium Small Size Firms)
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Full agreement with the company
Send a copy of the agreement to CS and BRSA
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CCB agreement more than 75
FR contract signed
Monitoring process

• Consultation process
• Between CCB and company
• Between CCB members

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disagreement with the company
Financial Restructuring IMPOSSIBLE
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CCB agreement less than 75
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REGULATIONS RELATED TO FRP
Realized
All papers, agreements, colleterals arranged
during the process should be fund, legal fee and
tax exempt Problems coming from priority and
privileges of state receivables should be
removed Legal preparations about foreign
currency mortgage should be completed If
companies can not close their export commitments
(related to the loans that were taken within the
framework of this program) during the program,
sanctions should be postponed until the end of
the program Public Sector Banks, Emlak Bank of
Turkey in Liquidation Process and SDIF should be
able sign this agreement
Regulations on the Agenda
The construction of the organizational structure
Necessary amendments to provisioning regulations
Funding possibilities for Asset/Liabilities term
mismatches and interest risk removal Regulations
intended to speed up the enforcement process of
claims under the Enforcement and Bankruptcy Law"
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Expected results of the program from view of
point Real Sector
Efficient relations with Finance Sector
Debt and corpoate restructuring
Healthy cash flow
Productivity increase
Problem loan
Negotiation
Increasing tax payment capacity
Healthy Relations with Financial
Sector
FR contract
Efficiency
Employment increase
HEALTHY GROWTH IN REAL SECTOR
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Expected results of the program from view point
of Financial Sector
Funding from international institutions
BRSA provisioning regulations
Tax, duty,fees
Funding Possibility
Improving maturity composition, decreasing
interest rate risk
Improving asset quality
Problem loan
Negotiation
FR contract
Healthy relations with the firm
Strengthening the financial structure
GROWTH IN FINANCIAL SECTOR
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Expected results of the program from whole view
point of economy
Adaptation to international norms
Successful financial program
Stability and reliability
Inflow of foreign capital
Increasing revenues
Implementable regulations
Decreased funding cost
Healthy cash flow through SMEs
STATE BUDGET
FINANCIAL SECTOR
REAL SECTOR
Healthy balance sheets, reliable financial sector
Following the FR contract Healthy and efficient
relations
Strong economy
Employment increase
Increasing productivity and export
Improving in the country rating
Increasing GNP
HEALTHY GROWTH IN WHOLE ECONOMY
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