Cash Flow Projections in a Concordat: Assumptions and Consistency

In a concordat application, the repayment percentage and timing offered to creditors depend on the cash the company will generate in future. The cash flow projection is therefore at the centre of financial preparation. This article explains how to build the projection, the consistency checks it should pass and how it connects to the relevant provisions of the law. It is recommended that the legal steps of the application be handled with a lawyer; for the general framework, see financial preparation before a concordat.

Where the law connects

Provision	Content	Effect on the projection
İİK Art. 286(1)(a)	The preliminary project shows at what percentage or over what period debts will be paid, whether assets will be sold, and how the funds needed to continue trading and make payments will be raised: capital increase, credit or another method	Each source shown on a separate line with its basis
İİK Art. 286(1)(d)	A table comparing the amount creditors would receive under the offer with the amount they would probably receive in bankruptcy	The repayment plan and the liquidation scenario rest on the same asset and liability data
İİK Art. 297	The debtor may continue trading under the commissioner’s supervision; the court may make certain acts subject to the commissioner’s permission. From the moratorium decision, without court permission the debtor may not grant pledges or guarantees or make gratuitous dispositions, and may not transfer or encumber real estate, movables important to the business or the business’s permanent installations; acts in breach are void	Asset sale and collateral assumptions flagged as subject to permission
İİK Art. 305(1)(a) and (b)	For confirmation, in an ordinary concordat the offer must exceed the probable amount in bankruptcy (a), and the amount offered must be proportionate to the debtor’s resources (b; the court decides whether the debtor’s expected rights are taken into account)	The projection shows that the offer is proportionate to the debtor’s resources and is better than bankruptcy (proportionality is for the court to assess)
İİK Art. 286(1)(e)	An independent audit report giving reasonable assurance that the offer will be fulfilled	The projection’s feasibility underpins this report

A two-layer projection

1. Weekly cash plan (during the process): The cash needed for the company to keep trading during the moratorium. Payroll, critical suppliers, energy, tax and social security payments are shown separately. Assumptions that suppliers may demand cash in advance and that credit lines may be unavailable during this period should be assessed separately.

2. Repayment plan projection (the whole repayment period): A monthly or quarterly projection based on assumptions for sales, margins, working capital, capital expenditure and tax. Each instalment in the repayment plan is compared with the free cash generated in that period.

Consistency checks

Check	Question
Comparison with the past	Can the sales and margin assumptions be explained by recent actuals?
Working capital	Have shorter supplier terms and changes in collection periods been taken into account?
Basis of sources	Is there documentation and a timetable for asset sales, capital increases or credit? Are transactions needing permission during the moratorium flagged?
Fit with the repayment plan	In each period, is the instalment lower than that period’s free cash?
Downside scenario	How long can the plan be sustained if sales fall by a given amount?
Comparison table	Are asset values in the liquidation scenario consistent with the probable sale prices in the interim balance sheet?

Hypothetical example: comparing the offer with bankruptcy

Hypothetical example — not based on a real company.

Suppose ordinary (unsecured) creditors are owed TRY 10,000,000 in total. The preliminary project offers to pay 60% of these claims in equal instalments over three years: TRY 6,000,000 in total, TRY 2,000,000 a year. On the interim balance sheet prepared at the probable sale prices of the assets, it is estimated that, after deducting secured and preferential claims and liquidation costs, TRY 2,500,000 would remain for ordinary creditors in bankruptcy (this amount is an assumption of the example).

	Amount (TRY)	Share of ordinary claims
Offer (nominal total)	6,000,000	60%
Probable amount in bankruptcy	2,500,000	25%

In nominal terms the offer exceeds the probable amount in bankruptcy. But because it is spread over three years, creditors may also look at the present value of the payments. The projection should also show that the TRY 2,000,000 annual instalment can be met from free cash remaining after operating needs; this underpins the feasibility of the offer and the reasonable assurance report (Article 286(1)(e)). Whether the offer is proportionate to the debtor’s resources (Article 305(1)(b)) is a separate question: as a matter of professional judgement, the projection should be built to show that the offer is proportionate to the company’s resources; proportionality is for the court to assess. Whether the conditions are met is decided by the court.

Common mistakes

• Building the projection backwards from the repayment plan: If the offer is set first and the figures are made to fit, the assumptions become indefensible.
• Forgetting cash needs during the process: The company can run out of cash before the repayment plan starts.
• Showing asset sales that need permission as certain: During the moratorium some dispositions require court permission (Article 297).
• Preparing the comparison table from different data: The interim balance sheet, liquidation table and projection should come from the same data set.

What it means for management

In a concordat, the cash flow projection is the document that seeks to show that the offer is better for creditors than bankruptcy, proportionate to the debtor’s resources and feasible. Assumptions consistent with the past, documented sources and at least one downside scenario determine its credibility. Preparing the projection is financial work; the confirmation assessment belongs to the court.

Sources last checked: 21 October 2026