How do you prepare the financial plan for a concordat application?
A concordat is a financial commitment as much as a legal process. The plan’s credibility depends on a complete debt inventory, a cash projection that supports the payment schedule and a clear comparison with bankruptcy.
A concordat (konkordato) is the legal route in Turkey by which a debtor that cannot pay its debts as they fall due, or is at risk of not being able to, pays them over a set period and/or at a discount under an agreement with its creditors approved by the court. It is governed by the concordat provisions of the Enforcement and Bankruptcy Law No. 2004 (Articles 285 et seq.).
This article does not deal with the legal side of the process but with how the financial plan that forms the backbone of the application is built. For legal procedure, documents and time limits, current legislation and legal advice must be relied on.
Why is the financial plan decisive?
The core question creditors and the court ask is: can the debtor actually deliver the proposed payment plan, and does the plan leave creditors better off than bankruptcy? That can only be answered with numbers.
Among the documents to be filed with the application, the legislation lists the preliminary concordat plan, documents showing the debtor’s assets, and a table comparing what creditors would receive if the concordat is accepted with what they would receive in bankruptcy, together with a report from an independent audit firm on the plan’s likelihood of success. Financial analysis is therefore not an optional annex but a required part of the process.
Financial components of the plan
| Component | Content |
|---|---|
| Debt inventory | All creditors; amount, maturity, collateral and priority |
| Asset statement | Book values and realistic sale values of assets |
| Cash flow projection | Cash the business will generate over the plan period |
| Payment plan | Proposed terms and discount by creditor group |
| Bankruptcy comparison | What the same creditors would receive in bankruptcy |
| Assumptions and sensitivity | Critical assumptions and the effect of changes |
1. Debt inventory: completeness
One of the most common mistakes is an incomplete or inconsistent list of debts. Bank loans, trade payables, public debts, amounts owed to employees, letters of guarantee and contingent liabilities should be listed separately, and every item should agree with the accounting records. Secured and preferential claims should be identified, as they are treated differently in the payment plan.
2. Cash projection: credibility
The payment plan must be supported by the cash the business will generate. That needs a monthly projection based on assumptions for sales, margins, working capital and fixed costs, consistent across the income statement, balance sheet and cash flow; I explain why this consistency matters in Why does a business plan need three statements?
The weakest point of the projection is usually the sales assumption. A company in concordat proceedings has customer and supplier relationships under pressure; assuming past performance will simply continue may be unrealistic.
3. Bankruptcy comparison: clarity
The comparison table shows, for each creditor group, what would be received in bankruptcy and if the concordat is accepted. The bankruptcy scenario uses forced-sale values of assets, the costs of the process and the statutory order of priority. I explain the logic in detail in Restructuring or liquidation?
4. Assumptions and sensitivity
Every projection rests on assumptions. Writing them down and showing how the payment plan is affected if the critical ones change makes the plan more credible. For example, the plan can show in which year a shortfall would appear if sales came in 10 percent lower.
The plan and operational recovery
A concordat reorganises debt, but it does not fix a loss-making business on its own. For a lasting result, the financial plan should be accompanied by an operational turnaround plan with concrete steps on costs, margins and working capital.
You can see how the financial plan can be prepared in a modular structure in the Concordat Project File Module.
Frequently asked questions
What is the difference between concordat and bankruptcy?
In bankruptcy the company stops operating and its assets are sold and distributed to creditors. In a concordat the debtor keeps operating and pays its debts under a plan agreed with creditors and approved by the court.
Who prepares the financial plan?
The debtor company submits it; it is usually prepared by the company’s finance team together with financial and legal advisers. The independent audit firm report required by the legislation is a separate, independent assessment.