Building Türkiye’s Future: Legal Insights on Multi-Bank Project Finance

I. Introduction

Project finance continues to serve as a vital instrument for advancing Türkiye’s infrastructure and industrial agenda. Whether in energy, transportation, healthcare, or heavy manufacturing, long-term investments structured around the future cash flows of a project—rather than the balance sheet strength of its sponsors—have become essential to delivering complex, capital-intensive undertakings.

Amid Türkiye’s commitment to expanding renewable energy capacity, modernizing transport corridors, and strengthening strategic industrial bases, there is sustained interest from both domestic and international investors. At the same time, economic shifts and regulatory developments underline the need for robust and sophisticated legal structuring to ensure bankability and to allocate risks effectively among sponsors, lenders, and public authorities.

Against this backdrop, navigating Türkiye’s project finance landscape requires more than transactional execution; it demands a deep understanding of local corporate, banking, and sector-specific regulations that govern these often multi-billion-dollar undertakings.

II. The Consortium Model: A Preferred Financing Route

In Türkiye, large-scale project finance transactions are typically structured through a consortium (or syndicate) of banks, reflecting both the size of required capital commitments and the risk profiles of these ventures. This approach allows multiple lenders—often a mix of Türkiye’s leading commercial banks, international financial institutions, and, where applicable, export credit agencies (ECAs)—to pool resources and share exposure under coordinated lending arrangements.

The legal foundation for such consortia rests primarily on the Turkish Banking Law No. 5411, which governs domestic lending practices, together with contractual frameworks such as intercreditor agreements and agency mandates that outline each lender’s participation, voting thresholds, and enforcement rights.

Structuring these financings through consortia delivers several strategic advantages. It enhances underwriting capacity by aggregating the lending limits of multiple banks, facilitates the allocation of project risk across institutions with varying sector appetites, and often brings together diverse operational expertise critical for overseeing complex assets.

Given Türkiye’s ambitions in energy, transportation, and industrial renewal—many of which exceed the comfortable single-exposure thresholds of even its largest lenders—consortium-based structures have become the prevailing mechanism to fund projects of this scale.

III. Key Legal Aspects

1. Special Purpose Vehicles (SPVs)

A fundamental feature of project finance transactions in Türkiye is the use of a Special Purpose Vehicle (SPV)—typically established under the Turkish Commercial Code No. 6102 as either a joint stock company (Anonim Şirket, A.Ş.) or a limited liability company (Limited Şirket, Ltd. Şti.). This structure serves to isolate the risks and obligations of the project from the broader financial and operational exposures of the project sponsors.

Under Turkish law, the SPV becomes the contractual focal point: it is the entity that holds all project assets, enters into the construction and operation contracts, signs the financing agreements, and issues the security packages required by lenders. This compartmentalization ensures that the project’s cash flows are ring-fenced, giving lenders direct access to revenues and collateral without interference from unrelated obligations of the sponsors’ other businesses.

The creation of the SPV also facilitates compliance with sector-specific licensing regimes, as many authorizations—such as energy generation licenses issued by the Energy Market Regulatory Authority (EMRA)—must be granted in the name of the entity that owns and operates the project.

From a lender’s perspective, dealing with an SPV provides clarity and certainty, allowing security interests to be concentrated over a single entity’s assets, shares, receivables, and contractual rights, in accordance with Turkish collateral, pledge, and mortgage regulations.

2. Security Package & Enforcement

A comprehensive and properly perfected security package is at the heart of project finance transactions in Türkiye. Turkish law provides a mature legal framework for securing creditors’ rights, chiefly under the Turkish Civil Code No. 4721, the Pledge Law on Movable Assets No. 6750, and the Execution and Bankruptcy Law No. 2004.

Typically, the security arrangements in a Turkish project finance transaction will include:

• Mortgage over immovable assets: Registered with the relevant land registry directorate, covering land, buildings, and integrated machinery, ensuring direct recourse against physical project infrastructure.
• Pledge over project receivables: Often structured as an assignment of future revenues (such as electricity sales, toll payments, or service fees) perfected through notarial agreements and notifications to obligors.
• Share pledge over the SPV: Registered with the Central Registry Agency (MKK) for joint stock companies or recorded through share ledger annotations for limited companies, giving lenders the right to seize ownership interests in default scenarios.
• Pledge over bank accounts and project insurances: Ensuring that lenders have control over cash flows and proceeds under the Turkish Banking Law and collateral rules.
• Assignment of material project contracts: Including EPC agreements, O&M contracts, concession or license rights, and insurance policies, with notice to counterparties under Turkish contract and pledge law.

Enforcement in Türkiye follows the processes established by the Execution and Bankruptcy Law. While the statutory procedures include formal auction or judicial sales, careful contractual drafting (including direct agreements with offtakers and contractors) helps mitigate enforcement delays, granting lenders the ability to exercise step-in rights or replace operators swiftly.

The structuring of this security package must also comply with sector-specific legislation (for example, EMRA rules on energy licenses), which may impose consent or notification obligations on transfers or pledges of licensed operations.

3. Intercreditor Arrangements

In multi-bank project financings—especially those involving Turkish and international lenders together—an intercreditor agreement is indispensable to regulate the relationship among the different financing institutions. While many such agreements are initially modeled on Loan Market Association (LMA) standards, they must be carefully adapted to the requirements of Turkish law and practice.

These agreements typically set out:

• Ranking and priorities: Determining how senior loans, subordinated facilities, hedging obligations, and other debts rank in payment and enforcement scenarios.
• Voting and decision-making: Establishing majority thresholds for waivers, amendments, or acceleration actions, which is critical given the number of parties involved.
• Enforcement standstill periods and coordination: Preventing individual lenders from taking unilateral enforcement actions that could disrupt orderly project recovery or asset value preservation.
• Appointment of a facility agent and security trustee: The agent acts on behalf of all lenders to administer the loan, while the security trustee holds and enforces the collateral under Turkish pledge and mortgage laws.

Turkish law recognizes the validity of these intercreditor structures, but practical enforceability depends on ensuring that the local security documents and registrations clearly empower the security trustee (or collateral agent) to act on behalf of the entire lender group. This often involves explicitly granting parallel debt structures or fiduciary assignments under Turkish law to avoid privity obstacles that could otherwise impair collective enforcement.

In addition, many intercreditor frameworks in Türkiye incorporate specific provisions to handle Turkish regulatory requirements, such as notifying the Banking Regulation and Supervision Agency (BDDK) or securing waivers under sector licenses, which may otherwise restrict the transfer or assignment of operational rights.

4. Regulatory Approvals & Sector Licenses

Project finance transactions in Türkiye operate within a layered regulatory environment that demands close compliance with general banking laws as well as sector-specific frameworks. This makes early and thorough regulatory planning critical to the success and enforceability of the financing.

At the general level, the Banking Regulation and Supervision Agency (BDDK) oversees the activities of Turkish banks under Banking Law No. 5411, including large exposure limits, capital adequacy, and the reporting obligations that consortia must observe. Syndicated facilities involving foreign lenders also often attract scrutiny under Türkiye’s rules on cross-border financial flows, governed by the Decree No. 32 on the Protection of the Value of Turkish Currency and its implementing communiqués.

From a sector standpoint, nearly all infrastructure and industrial projects require dedicated operating licenses or concessions:

• Energy projects must comply with the licensing regime under the Electricity Market Law No. 6446 or the Natural Gas Market Law No. 4646, administered by EMRA. These licenses often include restrictions on transfer, pledge, or change of control that necessitate obtaining EMRA’s prior consent before executing share pledges or assigning rights under key contracts.
• Transportation infrastructure projects (airports, highways, ports) typically fall under the oversight of the Ministry of Transport and Infrastructure, often within public-private partnership (PPP) models governed by BOT or BLT frameworks. Concession agreements with the state will frequently impose direct requirements for lenders’ step-in rights to be acknowledged.
• Competition law considerations under Law No. 4054 on the Protection of Competition may also come into play, particularly in mergers or acquisitions of operational projects that involve thresholds triggering notification obligations to the Competition Authority.

Navigating these regimes demands tailored advice to ensure that all necessary approvals, notices, and registrations are secured, and that security arrangements or direct agreements are enforceable without violating statutory constraints embedded in sectoral laws.

5. Currency Risk & Hedging

Given Türkiye’s macroeconomic environment and historical currency volatility, most large-scale project finance facilities are structured in foreign currencies, predominantly USD or EUR, to align with the sourcing of equipment, offshore contractors, and lender preferences. However, this exposes project cash flows to significant exchange rate risks, particularly for projects that generate revenues in Turkish lira.

To mitigate these exposures, sponsors and lenders frequently employ hedging instruments—primarily currency swaps and forward contracts—arranged under standard ISDA Master Agreements or local Turkish derivatives documentation. Under Turkish law, such transactions are regulated by the Capital Markets Law No. 6362 and related communiqués issued by the Capital Markets Board (CMB), which govern derivatives markets, reporting obligations, and risk management standards.

Legal counsel plays a pivotal role in ensuring that:

• Hedging agreements are effectively integrated into the broader financing structure and recognized under the intercreditor framework, so hedging liabilities are treated appropriately in cash waterfalls and enforcement scenarios.
• Security packages extend to collateral assignments of hedge proceeds, typically via pledges over derivative receivables and associated bank accounts.
• All documentation complies with Turkish law formalities, including notarial certifications and registrations where necessary, to avoid enforceability issues.

Moreover, hedging arrangements often require close coordination with sector regulators. For instance, EMRA may review certain hedging structures in energy projects to ensure they do not violate market operation principles or license restrictions.

By structuring compliant and comprehensive hedging frameworks, sponsors and lenders can safeguard project economics against currency fluctuations—an indispensable element of bankability in Türkiye’s current financial climate.

IV. Experience in the Market

Project finance transactions involving bank consortia in Türkiye are inherently multi-faceted, requiring the coordination of sponsors, lenders, regulators, and often international counterparties. It is now standard practice in Türkiye for specialized legal teams to be engaged to support these transactions across various fronts.

This typically involves assisting in the incorporation and corporate structuring of SPVs, drafting and localizing complex finance and security documentation, navigating Turkish registry systems for mortgages, share pledges, and receivables assignments, and ensuring sector-specific regulatory compliance—whether under EMRA’s licensing regime for energy assets or concession oversight by the Ministry of Transport and Infrastructure for PPP initiatives.

Local legal support is also critical when aligning multi-bank structures with Turkish enforcement practices, managing notifications and consents under sector licenses, and addressing foreign exchange compliance under the framework of Decree No. 32. Additionally, counsel often facilitates coordination between Turkish and international banks to adapt standard LMA or ISDA terms to local requirements.

This practical experience across diverse industries—energy generation, large-scale manufacturing, transport infrastructure—has helped establish the accepted structures for project finance in Türkiye today, allowing stakeholders to anticipate challenges related to regulatory approvals, security perfection, and multi-party coordination.

V. How Clients are Typically Supported

Given the complex regulatory, contractual, and financing frameworks that govern project finance transactions in Türkiye, local legal teams play a central role in safeguarding the viability and enforceability of these deals.

Support typically includes:

• Structuring and establishing SPVs: Advising on the appropriate corporate form under the Turkish Commercial Code, preparing articles of association, and ensuring compatibility with sector licensing needs.
• Preparing and localizing transaction documentation: This involves adapting loan agreements, intercreditor arrangements, security documents, and direct agreements to comply with Turkish statutory requirements and notarial formalities.
• Perfecting and registering security interests: Handling registrations of mortgages with land registries, share pledges with the Central Registry Agency, receivables pledges under the Turkish Pledge Law, and related filings to secure lenders’ rights under Turkish law.
• Regulatory liaison and compliance: Managing interactions with regulatory bodies such as the Banking Regulation and Supervision Agency (BDDK), EMRA, the Ministry of Transport, and the Competition Authority, including securing necessary approvals and filings.
• Coordination of multi-jurisdictional issues: Ensuring that foreign law governed documents, such as LMA-based facility agreements or ISDA hedging arrangements, are effectively aligned with Turkish collateral and enforcement regimes.

By addressing these elements comprehensively, local counsel help ensure that the financing structure is legally sound, regulatory risks are mitigated, and the security package remains enforceable in line with Turkish legal standards.

VI. Conclusion

Project finance remains a principal method for advancing Türkiye’s infrastructure and industrial objectives, particularly where large capital requirements and long revenue horizons demand sophisticated financing solutions. In this landscape, structuring transactions through bank consortia and ensuring rigorous compliance with Türkiye’s corporate, banking, and sector-specific regulations are essential to achieving enforceable, bankable outcomes. As projects grow in scale and complexity, careful legal planning and alignment with local statutory frameworks continue to be critical to protecting the interests of all participants and securing long-term success.