Transactional issues

SPV forms

Which forms can special purpose vehicles take in a securitisation transaction?

Under the AMBS legislation, SPVs can either be established as a fund or an MFI, which is a joint stock company. As per our foregoing inputs, there is not any regulation for offshore SPVs in this respect.

SPV formation process

What is involved in forming the different types of SPVs in your jurisdiction?

Pursuant to the AMBS legislation, AFFs can only issue ABSs, and HFFs can only issue MBSs, as opposed to MFIs, which can issue them both. The AMBS legislation provides two alternative procedures for the establishment of a fund. An application for the establishment of a fund and AMBS issuance can be made simultaneously or, alternatively, an application for the establishment of a fund can be made in advance of the application for issuance. As for the establishment of an MFI, the application should first be made to the CMB for the MFI’s establishment. Once the CMB grants establishment approval, the following application should be made to the Ministry of Trade for the establishment of an MFI. Subsequently, another application for the activity licence must be made to the CMB. AMBS issuances that involve a public offering in Turkey should be made at once. On the other hand, AMBS issuances that are to be made outside Turkey, or in Turkey without a public offering, can be made in tranches within a definite time period overseen by the CMB, which grants the issuance certificate. Before each AMBS issuance outside Turkey, or in Turkey without a public offering, an additional application has to be made in order to obtain the approval from the CMB for the issuance of the respective tranche. However, issuance of an additional tranche can be made either after redemption of all outstanding AMBSs under the existing tranche and modification of the by-law for the new tranche, or by establishing another fund or MFI.

In case a fund is founded by an originator as foreseen under the AMBS legislation, then the by-laws of the fund have to be approved by the CMB, and such by-laws have to comply with the requirements set forth the AMBS Communiqué.

Governing law

Is it possible to stipulate which jurisdiction’s law applies to the assignment of receivables to the SPV?

Under Turkish law, it is possible to stipulate which jurisdiction’s law applies to the assignment of receivables. However, if a receivable arises from a Turkish law-governed contract, choice of foreign law as the governing law under the assignment agreement of such a receivable may potentially be challenged before the Turkish courts since it would conflict with Turkish international civil and procedure law, and Turkish courts may review the validity and enforceability of the assignment. In this case, it is advisable to have a Turkish law-governed assignment agreement executed in writing with regard to the origination of receivables in Turkey under a securitisation transaction. For offshore securitisation transactions for DPR; in addition to the typical programme documents subject to foreign law, it is common practice to have a separate bill of sale governed by Turkish law where the originator transfers the relevant assets to the SPV.

Asset acquisition and transfer

May an SPV acquire new assets or transfer its assets after issuance of its securities? Under what conditions?

For the purposes of the AMBS legislation, assets cannot be added to or removed from the portfolio of the issuer after the issuance, except:

  • if it is realised that assets that have been transferred to the issuer do not comply with the criteria set out under the Communiqué, circular or issuance certificate, the originator must replace such assets with compliant assets; or
  • if the issuer has provided a guarantee in favour of the AMBS investors, assets may be removed from the portfolio or replaced in accordance with the principles stated in the circular or issuance certificate.

For an offshore securitisation transaction, transactions by SPV will be subject to the programme documents and the foreign law that SPV is subject to. In any case, it has been common practice to establish security right on the assets of SPV for the benefit of investors to ensure protection.


What are the registration requirements for a securitisation?

Pursuant to the AMBS legislation, the issuers’ (ie, the funds’) by-laws must be registered with the relevant trade registry. As to registration of the AMBS, pursuant to the Communiqué, provisions of the Communiqué on Debt Instruments apply mutatis mutandis to AMBSs. Under its provisions, a domestically issued AMBS must be registered in electronic form before the CRA. For the AMBS issued abroad, the Communiqué on Debt Instruments only requires that the information regarding the following shall be notified to the CRA within three business days of the issuance:

  • the issuance amount;
  • the issuance date;
  • the International Securities Identification Number;
  • the maturity commencement date;
  • maturity;
  • the interest rate;
  • the custody institution; and
  • the currency and the place of issuance with respect to the respective AMBS.

Any changes to this information (including early redemption notifications) shall be notified to the CRA within three business days following the change.

If a Turkish bank raises financing through offshore securitisation, the bank has one month to notify the relevant tax office in writing of the issuer’s:

  • incorporation capital;
  • shareholder structure;
  • directors;
  • number of the issued securities; and
  • the names of those who have purchased the securities and amount of the securities.

Once the securities are repaid in full, the bank must provide another notification in writing of such repayment, and to whom the securities have been returned, within one month of repayment and return.

For offshore securitisation transactions, there is no specific filing whilst the originator is required to send information on the details of the SPV and transaction to the relevant tax authority pursuant to the provisions of Corporate Tax Communiqué (published in the Official Gazette dated 3 April 2007 No. 26482).

Obligor notification

Must obligors be informed of the securitisation? How is notification effected?

Under Turkish law, notifiying the obligor is not necessary to validate the assignment of receivables. However, unless the obligors are notified of the assignment, they can be discharged from their liabilities if they make a payment to the originator (assignor) instead of the issuer (assignee) in good faith. In practice, especially by the banks, certification notifications to obligors are effected through a notary public. Under the offshore securitisations, the general practice has been having the originator bank acting as the servicer, and not notifying the obligors in normal course of transactions in place. For the AMBS legislation purposes, it clearly provides that collections from the portfolio are already assets of the fund or MFI, and those shall be transferred to a separate bank account opened in the name of the fund or MFI promptly after the collection. Furthermore, this structure has been devised in a manner that does not require notification to the borrowers on the day that the transfer to the fund or MFI takes place.

What confidentiality and data protection measures are required to protect obligors in a securitisation? Is waiver of confidentiality possible?

According to the Law on Protection of Personal Data (No. 6698), the general rule for the processing of personal data is that such data can only be processed with the explicit consent of the data subject or with additional legal grounds that do not require explicit consent. Furthermore, as per Banking Law (No. 5411), banks are prohibited from disclosing documents of, and information on, their clients to third parties other than the official authorities specifically authorised to request confidential information from the banks pursuant to their applicable legislation. Therefore, it is advisable to include provisions relating to confidentiality and limitations regarding the use of data into contracts entered into for the purpose of securitisations, where counterparties of such contracts have access to confidential information and data of the obligors. Moreover, there is no rule restricting the waiver of confidentiality and, generally, such waivers are taken from obligors by the banks in advance, (eg, the documentation used in opening deposit accounts or the provision of loans).

Credit rating agencies

Are there any rules regulating the relationship between credit rating agencies and issuers? What factors do ratings agencies focus on when rating securitised issuances?

The Communiqué on Principles Regarding Rating Activity in Capital Markets and Rating Agencies (Series VIII, No. 51) (the Communiqué on Ratings) regulates rating activities and principles in Turkey. It also outlines the conditions required to be licensed as a rating agency by the CMB in Turkey. Pursuant to the Communiqué on Ratings, credit rating agencies should pursue an honest and impartial relationship with issuers. Furthermore, credit rating agencies should ensure confidentiality and independence, and avoid all kinds of activities that may cause a conflict of interest.

Based on offshore securitisation issuances to date, when assessing the rating of transactions, credit rating agencies focus on:

  • the true sale nature of the transfer of underlying assets;
  • the bankruptcy remoteness between the issuer and the originator;
  • recourse or non-recourse characteristics;
  • set-off;
  • the economic performance of underlying assets; and
  • other applicable criteria in relation to the originator and its country.

We would like to underline that, for offshore securitisation transactions, ratings by major foreign rating agencies are obtained usually (for either originator or the notes issued under the programme).

Directors’ and officers’ duties

What are the chief duties of directors and officers of SPVs? Must they be independent of the originator and owner of the SPV?

Pursuant to the AMBS legislation, AFFs and HFFs must have a fund board consisting of three members, while MFIs must have a board of directors consisting of at least five members. At least one member of the fund board and MFI must be independent. The board is responsible for the following:

  • preparation, registration and announcement of amendments to the fund’s by-laws and documents in relation to issuance;
  • formation, valuation, protection, custody and registration of portfolio assets, and keeping records, documents and information in relation to portfolio assets;
  • representation, management, audit and supervision of the issuer in accordance with the principles and methods under legislation, the fund’s by-laws, circular, issuance certificate and other documents in relation to issuance in a manner protecting the interests of investors;
  • opening bank accounts in the name of the issuer, making payments to investors accurately and ensuring compliance of other payments made by the issuer in accordance with the Communiqué;
  • preparation and presentation of investor reports in accordance with the Communiqué;
  • ensuring that the servicer duly performs its services and replacing the servicer if the servicer fails to do so; and
  • other responsibilities arising from respective legislation or as may be required by the CMB.

The fund’s board may appoint a bank or an intermediary institution that meets the requirements for founders as the operation manager for the fulfilment of its duties, except the supervision of the servicer. However, such a transfer of duty shall not prejudice the fund’s responsibilities under the Communiqué. Furthermore, the fund’s board should appoint an internal auditor who does not engage in the operations of the issuer.

Risk exposure

Are there regulations requiring originators and arrangers to retain some exposure to risk in a securitisation?

Pursuant to the Communiqué, the originator or founder or MFI, must purchase 5 per cent of the nominal value of the AMBS and hold it until the maturity. The originator and founder or MFI can comply with this requirement, splitting the amount between them. The CMB may change this ratio, depending on the type of asset, and increase it up to 10 per cent on the basis of the originator or founder or MFI. If there is more than one tranche of AMBS, which having been rated the same or not having been rated at all, the founder or MFI should distribute its holding equally or pro rata between the tranches. Alternatively, if the tranches have different ratings, the founder or MFI should hold the tranche with the lowest rating.

There is no such requirement for offshore securitisation transactions.