THE BANKS ASSOCIATION OF TURKEY

FRAMEWORK AGREEMENT ON FINANCIAL RESTRUCTURING

PROGRAM

PRESENTATION

BY

WORKING GROUP

ON FINANCIAL RESTRUCTURING

May 24, 2002

Creditor Institutions & Supporting Organizations in the Agreement

Saving Deposit Insurance Fund (SDIF)

BAT member banks

Special Finance Institutions (SFI)

Emlak Bank of Turkey in Liquidation Process

Other Financial Institutions

Union of Chambers and Commodity Exchanges of Turkey -UCCET (TOBB)

Turkish Industrialists’ & Businessmen’s Association-TIBA-(TUSİAD)

SUPPORTING INSTITUTIONS

CREDITOR ORGANİZATIONS

1

Purpose of the Agreement

1. Following the financial restructuring, the achieving ability of efficient working of the producer firm, hence creating a favorable business environment for small and medium size enterprises, which are suppliers and buyers,

2. Ensuring that both the corporate sector and the financial sector institutions have regular, sound and transparent balance sheets through compliance with the arrangements based on the provisions of the Agreement hereby,

3. Providing the firms that have the capacity to add value in the corporate sector become effective in the economy, increasing the capacity utilization, improving the national welfare through increasing production and employment.

2

Definitions

Large Size Firms

Employing permanently > 100

Annual export > $ 15.000.000

Annual turnover > TL 25 trillion

The assets in the audited balance sheet > 15 trilyon TL

Medium and Small Size Firms

The firms and groups of firms except for the criterias defined for “Large Size Firms”

On the condition that having capacity to add value to the economy, the firms who will satisfy at least two of the mentioned criteria and produce risks for financial sector at an amount more than USD 10 million shall be

concerned as “Large Size Firms”

3

Framework AggreementGeneral Quarum Conditions

Provisioning Regulations

Loan Classifications

1st Group–Loans-Standard Performing

2nd Group–Loans-Under Special Follow-Up

3rd Group–Loans-Limited Collectibility

4th Group–Loans-Collectibility Uncertain

5th Group–Loans-Uncollectable

4

Classified Date

Jan 31th, 2002

Prerequisite: As of

Jan 31st, 2002

categorized in any of

these 3 categories at

any bank

Arbitration Commitee

(Large Size

Firms)

No

Yes

(55-75 %)

Decision

Acceptance

Rate

% 90

% 75

P.S. : In the following slides, process is presented according to 75 % rule. If the related company that will be included in the FRP, is not classified in any of the 3rd, 4th or 5th categories at any bank then for the rest of the presentation, the ratio stated as 75 % must be taken into consideration as 90 % and it must be taken into account that for large scale companies it will not be possible to apply for the Arbitration Committee.

Organisational structure

FIRM

SUBJECT TO FINANCIAL RESTRUCTURING

LEADER BANK

CONSORTIUM OF CREDITOR

BANKS

COORDINATION SECRETERIAT

1 coordinator and sufficient number of technical and administrative staff appointed by Board of Directors of BAT

ARBITRATION COMMITEE

(For large scale firms

3 persons appointed by the Board of Directors of BAT and BRSA observer

5

Process (For Large Size Firms)

One of the 3 banks who has the biggest risk can initiate the process

Small creditor banks who own %25 of total risk can apply for one of the 3 big creditor banks to initiate the process

The bank who initiates the process, shall receive the letter of undertaking from the company and apply to the CS in two business days

CS inform other creditor banks and invite all banks and the company to the first meeting

In first CCB meeting (*)

-CCB members shall be identified

-Leader bank shall be identified

-Agenda of negotiation process shall be identified

-Conditions are reviewed and working plan is prepared

Second CBC meeting are held two days following the first meeting. after the within 2 days in the second CBC meeting, if necessary, rules of standstill process shall be identified

1-a

1-b

2 3 4 5

(*) CCB Consortium of Creditor Banks 6

Process (For Large Size Firms)

Negotiation process

-Between CCB and company

-Among CCB members

For subjects of disagreement;

Apply to AC through CS, AC get written opinion of sides, announce decision within 5 days. This decision will be put in practice by CCB

Apply for Arbitration Committee

6

7 8

9

No agreement with the firm

CCB agreement between 51% - 75 %

CCB agreement more than 75%

10

11

Full agreement with the firm

CCB agreement less than 50%

Financial Restructuring IMPOSSIBLE

FR contract signed

Monitoring process

CS and through CS BRSA are informed.

12

13

14

15

7

Process (For Medium & Small Size Firms)

At least two banks who represents 51% of total risk come together to start the process

Banks who initiate the process, get the commitment letter from the firm and give application to CS in two business days. In this situation will start the process

In first CCB meeting;

-CCB members are defined

-Leader bank is decided

-Conditions are reviewed and working plan prepared

-Consultation process agenda is defined

1 2 3 4Second CCB meeting

Within 2 days in the second CCB meeting, if necessary, rules of standstill process are defined

8

Process (For Medium & Small Size Firms)

56 7

8

9

10

11

12

Consultation process

-Between CCB and company

-Between CCB members

disagreement with the company

CCB agreement more than 75%

Full agreement with the company

CCB agreement less than 75%

Financial Restructuring IMPOSSIBLE

FR contract signed

Monitoring process

Send a copy of the agreement to CS and BRSA

9

REGULATIONS RELATED TO FRP

All papers, agreements, colleterals arranged during the process should be fund, legal fee and tax exempt

Problems coming from priority and privileges of state receivables’ should be removed

Legal preparations about foreign currency mortgage should be completed

If companies can not close their export commitments (related to the loans that were taken within the framework of this program) during the program, sanctions should be postponed until the end of the program

Public Sector Banks, Emlak Bank of Turkey in Liquidation Process and SDIF should be able sign this agreement

The construction of the organizational structure

Necessary amendments to provisioning regulations

Funding possibilities for Asset/Liabilities term mismatches and interest risk removal

Regulations intended to speed up the enforcement process of claims under the Enforcement and Bankruptcy Law"

Realized

Regulations on the Agenda

10

Expected results of the program from view of point Real Sector

Problem loan

Negotiation

FR contract

HEALTHY GROWTH IN REAL SECTOR

Debt and corpoate

restructuring

Efficiency

Productivity increase

Healthy cash flow

Efficient relations with

Finance Sector

Employment increase

Increasing tax

payment capacity

Healthy

Relations with Financial Sector

11

Expected results of the program from view point of Financial Sector

Problem loan

Negotiation

FR contract

GROWTH IN FINANCIAL SECTOR

Funding from international institutions

Funding Possibility

BRSA provisioning regulations

Tax, duty,fees

Healthy relations with the firm

Strengthening the financial

structure

Improving asset quality

Improving maturity

composition, decreasing

interest rate risk

12

Expected results of the program from whole view point of economy

HEALTHY GROWTH IN WHOLE ECONOMY

STATE BUDGET

FINANCIAL SECTOR

REAL SECTOR

Following the FR contract

Healthy and efficient relations

Healthy cash flow through SME’s

Increasing revenues

Employment increase

Healthy balance sheets, reliable financial sector

Increasing productivity and

export

Implementable regulations

Increasing GNP

Adaptation to international norms

Successful financial program

Stability and reliability

Improving in the country rating

Decreased funding cost

Inflow of foreign capital

Strong economy

13