On December 25, 2019, the Debt Assumption Regulation, which governs the principles and procedures for the Turkish Ministry of Treasury and Finance to assume outstanding debts of the project company (SPV) to the lenders in case of termination of a project agreement in BOT projects in all sectors and other PPP projects in the healthcare and education sectors, was amended.
Prior to the amendment, the Ministry of Treasury and Finance could assume maximum 85% of the outstanding debt in case of project company default terminations. The amending regulation removes such restriction and permits assumption of the whole outstanding debt in case of terminations due to project company default as well.
The amending regulation also introduced a new requirement regarding the minimum rate of equity in projects where the Ministry of Treasury and Finance assumes the debt. Accordingly, the equity:debt ratio must be at least 30:70 in order for the Ministry to be permitted to assume the debt in a project. Prior to the amending regulation such ratio was 20:80 pursuant to the relevant clauses of the BOT Law no. 3996 and the Health PPP Law No. 6428.
The amending regulation provides that the above-explained new features will apply to both projects tendered after December 25, 2019 and the new debt assumption agreements to be signed after December 25, 2019 for the projects which were tendered subsequent to March 9, 2013 (which is the date when the debt assumption clause of the Public Financing and Debt Management Law No. 4749 entered into force). Consequently, new debt assumption agreements to be signed (in relation to, for example, change orders or refinancings) in existing BOT projects such as motorway and bridge projects which were tendered after March 9, 2013 will also be subject to the above-explained provisions of the amending regulation.
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