Communique Regarding Debt Securities

July 2013

The Communiqué Regarding Debt Securities (II-31.1) (“Communiqué”) was published in the Official Gazette dated 07 June 2013 and numbered 28670. The Communiqué on the Principles Regarding the Registration and Sale of Debt Securities (Serial: II, No: 22) was abrogated with this Communiqué. The Communiqué entered into force on 07 July 2013.

Issuance of Debt Securities

Debt securities may be issued through public offering or through private sale without being offered to the public. Sales conducted without a public offering are concluded as private placement and the debt securities are sold to a qualified investor.

The debt securities to be issued may be sold in tranches within the issuance limit, to be calculated pursuant to the Communiqué, and within the issuance limit deemed appropriate by the Capital Markets Board (“Board”). The issuance limit shall be determined in Turkish Lira for domestic issuances. The issuance limit shall be determined in Turkish Lira or a foreign currency for issuances conducted abroad. If the sale of the debt securities within a year, is made within the currency other than the approved currency by the Board, the serial issuance certificate shall be prepared in the sale currency. In such case, whether the sale amount is within the issuance limit shall be determined as follows:

1) If the serial issuance certificate is granted in a foreign currency and the issuance limit is given in Turkish Lira, the sale amount shall be converted to Turkish Lira based upon the Central Bank of Turkey (CBT) selling exchange rate on the business day prior to the application to the Board for the approval of the related serial issuance certificate.

2) If the serial issuance certificate is granted in Turkish Lira and the issuance limit is given in a foreign currency, the sale amount shall be converted to the relevant foreign currency based upon the CBT selling exchange rate on the business day prior to the application to the Board for the approval of the related serial issuance certificate.

3) If the serial issuance certificate is granted in a foreign currency other than the currency in which the issuance limit is given, the sale amount shall be converted to the foreign currency that determined the limit over the CBT cross rate on the business day prior to the application to the Board for the approval of the related serial issuance certificate. Where the cross rate disclosed by the CBT does not exist, CBT selling exchange rates should be taken into consideration for the calculation.

Debt securities offered to the public must be traded at the exchange and when application to the Board for approval is made, the issuers shall also apply to the relevant stock exchange.

The Board may request from the issuers that the payment obligations regarding the debt securities be guaranteed by a bank resident in Turkey or by a third legal person, or that the sale be open only to qualified investors.

Authorized Body Decision

A resolution by the general assembly for the issuance of debt securities is required. Unless clear higher quorums are determined under the company articles of association, Articles 418 – for public companies; and 421/(3) and (4) – for non-public companies – of the Turkish Commercial Code (“TCC”) regarding meeting and decision quorums of the general assembly shall be applicable.

The authority to issue debt securities may be transferred to the board of directors through the articles of association. The articles of association shall expressly stipulate that the board of directors has the authority to issue debt securities.

Pursuant to Art. 505 of the TCC, the general assembly may delegate the authority to issue debt securities to the board of directors for a maximum of 15 months. The related general assembly resolution shall expressly stipulate that the authority to issue has been transferred to the board of directors.

The maximum amount of debt securities intended to be issued and whether or not the sale will be held through public offering, or by private placement without resorting to a public offering option, must be resolved in the related authorized body decision.

Registration of Debt Securities and Notification to the Central Registry Agency (“CRA”)

Debt securities issued domestically must be registered electronically with the CRA and the rights arising from such securities must be tracked in the name of the right holder. Likewise, debt securities to be issued abroad must be registered electronically with the CRA.

The Board may, upon request from the issuer, give exemption to the requirement of the securities to be registered in the CRA so that the debt securities can be issued abroad. In such a case, the issuer must submit the following information to the CRA within 3 business days from the date of issuance of the securities abroad: amount of the issuance, date of the issuance, ISIN No., the commencement date of the term, maturity date, interest rate, clearing agent, currency and a list of countries where the issuance is conducted.

For issuances made before the Communiqué came into force and if the debt securities are still and currently in circulation, the issuers shall inform the CRA within one month following the effective date of the Communiqué of any debt securities issued abroad.

Issuance Limit

The issuance limit is calculated based on the annual financial statements for the fiscal year that are prepared in accordance with Board regulations regarding financial statements and reporting for companies traded on the exchange, and that are subject to independent auditing.

The issuance limit for public companies cannot exceed five times that of the equity amount provided in their annual financial statement, whereas for non-public companies the maximum issuance limit can be three times that of the equity amount provided in the financial statement. If the company is preparing consolidated financials then the equity of the parent company shall be taken into consideration.

The Board Fee

The fee to be paid to the Board is calculated from the issuance value in accordance with the rates below:

a) maturity up to 179 days, 0,05%,

b) maturity between 180 and 364 days, 0,07%,

c) maturity between 365 and 730 days, 0,1%

d) maturity longer than 730 days, 0,2%

The fee for debt securities issued abroad shall be paid before the serial issuance certificate (which is prepared before each issuance within the issuance limit) is approved and given to the issuer. Where the serial issuance certificate is prepared in a foreign currency, the amount constituting the basis for the calculation of the Board fee shall be determined in the Turkish Lira equivalent, which will be calculated by taking into account the CBT selling exchange rate on the business day prior to the application to the Board for approval of the related serial issuance certificate.

Conclusion

Although the Communiqué does not fully change the Communiqué (Serial: II, No: 22), certain points have been modified pursuant to provisions of the TCC and Capital Markets Law No. 6362. The issuance limits have been changed with the new Communiqué. Further, the registration requirement with the CRA for issuances abroad has been introduced.