Turkey: tahsisli sermaye artırımı, the HSDT and the Pay Tebliği (VII-128.1) floor that points the trailing VWAP upward

A Borsa Istanbul company can issue a convertible bond, but Turkey uses market-referenced pricing as a floor rather than as a discount. The Capital Markets Board's Shares Communique requires a conditional capital increase to strip the new-share subscription right entirely and treats the conversion price as one that should not fall below nominal value, and the exchange, not the parties, sets a placement price.

Key takeaways

• The conversion price is anchored to par, not to the tape. Pay Tebliği (VII-128.1) Madde 17(4): it is the principle that the price is „payın nominal değerinden düşük olmaması” — not lower than the share's nominal value.
• A şarta bağlı sermaye artırımı costs the pre-emption right outright. Madde 17(1): a conditional capital increase requires the yeni pay alma hakları to be completely restricted, and the Commercial Code's own conditional-capital provisions do not apply to public companies.
• The exchange prices an allocated increase. Madde 13(5): „Satış fiyatı borsa düzenlemelerine göre belirlenir” — a different price is possible only where the Board sees fit.
• Two routes exist without a public offering, and no more. Madde 13(1): tahsisli satış (allocated sale) and nitelikli yatırımcıya satış (sale to qualified investors).
• Below-par issuance is relief with a floor attached. Madde 18(1) opens it only where the 30-day weighted average is already below nominal value; Madde 18(3) then floors the issue price at that same 30-day average.

Turkey does use a trailing VWAP. It points the other way.

Most markets that block this structure do so by silence. Turkey does not: the Pay Tebliği (VII-128.1) contains exactly the measurement a market-referenced structure would want, and uses it as a minimum.

Madde 18 governs nominal değerin altında pay ihracı, issuing shares below nominal value. Sub-article (1) opens that door only where the average of the weighted average prices formed on the exchange in the thirty days before the capital-increase decision was disclosed is itself below nominal value — only, that is, to a company already trading under its own par. Sub-article (3) then sets the floor: „İhraç edilecek payların fiyatı… otuz gün içinde borsada oluşan ağırlıklı ortalama fiyatların ortalamasından aşağı olamaz.” A structure whose economics are the gap below the trailing average has that gap legislated away.

The conditional capital increase, and what it takes from shareholders

The Turkish machinery for a convertible — a hisse senedine dönüştürülebilir tahvil (HSDT), or its cousin the değiştirilebilir tahvil (exchangeable bond) — is the şarta bağlı sermaye artırımı, the conditional capital increase in Madde 17. Two features of it matter to an outside investor.

First, Madde 17(1) requires the yeni pay alma hakları to be completely restricted before the increase can be made, and disapplies the Turkish Commercial Code's conditional-capital regime for public companies, so the CMB's rulebook is the whole of the law here. Second, Madde 17(4) sets the pricing principle: the conversion price is not to be lower than the share's nominal value. Turkish convertible terms are adjusted for corporate actions — capital increases, dividends — with the adjusted price disclosed through KAP, the public disclosure platform. They are not adjusted because the shares fell.

Why there is no Turkish standby equity facility

What Turkey supports is a sequence of separately approved tahsisli sermaye artırımı — allocated capital increases to a named investor with rüçhan hakkı restricted. Inside the kayıtlı sermaye sistemi (registered capital system) the board fixes the amount and the sale principles by resolution, which is what makes repeat tranches conceivable at all. But each tranche still needs a CMB-approved ihraç belgesi (issuance document), the Board can attach conditions to it, and Madde 13(4) requires the sale to be executed on the relevant market of the exchange. A facility drawn at a price the investor has contracted for cannot survive a regime where the price is the exchange's and the permission is per issue.

From issuance document to tradable share

Shares are created by a board resolution inside the registered capital system against the approved ihraç belgesi, recorded dematerialised at MKK, the central registry, and traded on Borsa Istanbul. There is no Turkish counterpart to restricted securities, so nothing here resembles the analysis on Rule 144: the gate is permission at issuance, not a holding period afterwards. Turkey also operates an exchange-control regime and foreign investors deal through licensed local intermediaries, so cash-out mechanics need separate treatment.

The first Turkish question is not the discount but the par. If your shares trade below nominal value, Madde 18 is the only door, and it has its own floor. Send the market, the nominal value and the 30-day average. Read across to a listed-issuer convertible note and a private placement by a public company where pricing is negotiated.

• All markets
• India: a computed minimum price
• China: a pricing floor by formula
• Taiwan: formula plus a frozen exit
• Colombia: a stated price and a par floor

Primary sources

• CMB — Pay Tebliği (VII-128.1)
• CMB — Borçlanma Araçları Tebliği (VII-128.8)
• Sermaye Piyasası Kurulu
• Borsa İstanbul
• KAP — Public Disclosure Platform

Financing a Borsa Istanbul issuer: frequently asked questions

Does Turkey allow a conversion price that refixes downward?

No provision permitting it was found, and the Shares Communique points the other way. Article 17 requires a conditional capital increase to restrict the new share subscription right entirely and states that the conversion price should in principle not be lower than the nominal value of the share. Turkish practice adjusts conversion terms for corporate actions, not for a fall in the market price.

Who sets the price of an allocated capital increase in Turkey?

Not the parties. Article 13 of the Shares Communique provides that where an exchange-traded company sells shares in a capital increase without a public offering, the sale must be executed on the relevant market of the exchange and the sale price is determined according to exchange regulations, with a different price possible only if the Capital Markets Board sees fit.

Can a Turkish company ever issue shares below nominal value?

Yes, but only as relief for a company that is already trading below its own par, and only with a floor. Article 18 makes below-nominal issuance available where the average of the weighted average exchange prices over the thirty days before the capital-increase decision is disclosed is itself below nominal value, and the issue price may not be lower than that same thirty-day average.

Are shares from a Turkish allocated placement restricted?

There is no Turkish equivalent of the United States restricted-securities concept. Shares are created by a board resolution inside the registered capital system against an issuance document approved by the Capital Markets Board, recorded dematerialised at MKK and traded on Borsa Istanbul. The gating item is the approval of each issuance document, together with any condition the Board attaches to it.