Portfolios of Corporate and Commercial Loans
Asset Management Companies
Portfolios of Corporate and Commercial Loans
The Savings Deposit Insurance Fund (SDIF)(1) has announced its intention to solicit bids for the sale of portfolios of corporate and commercial loans. The portfolios will be sold in a number of tranches over the coming months.
The corporate and commercial loan portfolio represents the first group of loan assets scheduled for sale by the SDIF. The SDIF has categorized loan assets from 19 SDIF intervened banks. The programme of asset portfolio sales will draw from the SDIF’s small, medium and large corporate and commercial loans, which comprise approximately 10,000 loan files. These loans include both secured and unsecured loans.
The secured loans include those which are secured by pledge of collateral, a personal guarantee from the borrower, its affiliates or shareholders, or both. The collateral pledged as security for the corporate and commercial loans includes real estate, machinery and other types of property. The real estate security includes developed and undeveloped land, office buildings, retail stores, factories, industrial warehouses, multifamily dwellings, single family residences and hotels. The majority of commercial and corporate loans are expected to consist of defaulted term loans.
SDIF’s first tranche of loan receivables to be offered to the market will comprise loans drawn from the aforementioned portfolio with an aggregate total face value of at least TL420 trillion ($250 million). Sales data files are expected to be ready for use during December 2002.
The new Regulation on the Establishment and Operations of Asset Management Companies was promulgated in the Official Gazette on October 1 2002. It was prepared on the basis of Article 3(7) of Law 4743 on the Restructuring of Debts of the Financial Sector and Amendments to Some Laws.
‘Asset management companies’ (AMCs) refers to companies established as joint stock companies with limited liability through permission from the Banking Regulation and Supervisory Agency, for the purpose of purchasing and selling the receivables and other assets of banks, special finance institutions and other financial institutions after restructuring.
Key points concerning AMCs are outlined below.
- An AMC is allowed to participate in the purchase of non-performing loans (NPLs) from both government auctions and private institutions.
- Under Turkish law, assignments of NPLs can be executed without borrower consent unless such consent is required by contract.
- As with any bilateral agreement, the AMC can renegotiate a restructuring of these loans or can pursue bankruptcy/enforcement of mortgaged security in the courts.
- AMCs may not lend money directly or via a repossession agreement as they do not have a banking licence.
- AMCs will be allowed to enter into derivative contracts to hedge currency, credit, interest rate and other exposures.
- AMCs can purchase any domestic or foreign securities.
- The AMC can take loans from third parties to finance any future NPL purchases.
- Any AMC notes issued via international bond documentation (whether sold to Turkish or foreign entities) do not require any consent from Turkey’s capital markets board, but notes issued domestically require such approval, as well as a local listing.
For further information on this topic please contact Melis Cosan Baban or Ahmed Pekin at Pekin & Pekin by telephone (+90 212 313 35 00) or by fax (+90 212 313 35 35) or by email ([email protected] or [email protected]).
Endnotes
(1) SDIF is a public legal entity established to foster trust and stability in the banking sector by strengthening the financial structures of Turkish banks, including restructuring them as necessary and insuring their savings deposits.