2016.ANA METIN ingilizce.01

Legal Remedies for Corporate Bondholders in the

Event of Default

Att. Ali Sami Er

Those following the Turkish economy in the past months have

observed hot debates that are ensuing on the correlation between inter-

est and inflation. In the midst of the ongoing deliberations between

President Erdoğan and the Central Bank Governor, Mr. Başçı, the

Turkish Lira has been devalued 27% against the USD since April 2014.

While some dispute that excess TL devaluation to the tune of approx-

imately 10% as compared to other emerging market currencies is the

result of the uncertainty due to the upcoming June 7 general elections,

the economists emphasize that the Turkish economy, undoubtedly,

entered a period of stagflation where growth has been muted between

2-3% per year while inflation remains high at 6-7%. In capital markets,

we watch the effects of the liquidity crunch, as well, both in debt, and

in equity products. Thus, CDS rates are increasing compared to previ-

ous years

. Although these figures may not be indicative of corporate

bond defaults, we see that the legal remedies that are available under

Turkish law and the current regulatory trends may be of practical

importance for investors.

Nature of Corporate Bonds and Rights of Bondholders

A bond is a negotiable instrument that indicates a monetary right

of a creditor to be issued only by following a special procedure

Despite the special issuance procedure, there is no exceptional remedy

available through which investors may be protected by the credit or

default risk of the issuer.

CAPITAL MARKETS LAW

233

Article of April 2015

Domanic, Hayri

p. 313; Corporate Bonds, Banking and Commercial Law Journal December

1973 Volume VII/2.