|Isil Ökten||Mustafa Yigit Örnek|
The scope of the debt assumption undertaking includes the partial or whole repayment of financial obligations of the project companies, including those arising from the principal loan provided for relevant investment and services and related derivative products. The debt assumption undertaking consists of: (i) the whole amount of financing costs; and (ii) (a) if the project agreement is terminated due to project company's fault, 85% and (b) if the project agreement is terminated due to reasons not attributable to the project company, 100% of the loan amount. The following conditions need to be met for the granting of a debt assumption undertaking:
- BOT projects with a minimum amount of TL1 billion ($444.5 million) and PPP projects and education projects with a minimum amount of TL 500 million can benefit from the debt assumption undertaking;
- the debt assumption undertaking will apply if the relevant administration takes over the project facilities in the event that the relevant project agreements are terminated before their expiry date and there is such a clause in the relevant project agreement;
- further, the debt assumption undertaking can be provided after submission of an application by the administration in writing to the Treasury and obtaining its affirmative opinion;
- the administration requesting to provide such debt assumption undertaking should have no outstanding payment due to the Treasury;
- limits of debt assumption under the Budget Law and Decree Law need to be observed;
- the Treasury can further assume debt obligations for the derivatives up to 10% of the principal loan. This protection can enable the project companies to be active in derivative markets to mitigate any currency risk;
The matters regarding affirmative view of the Treasury, partial debt assumption undertaking and debt assumption limits will not be applicable to projects the tenders of which have been announced before the entry into force date of article 8 (A) of the Law No 4749 which is February 21 2013).
The Regulation is likely to further boost BOT projects, education projects through built-lease-transfer model and especially PPP projects in the health sector by making it easier for them to access funding.
Isil Ökten and Mustafa Yigit Örnek
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