Aug 01 2018

Turkish banks seek faster loan restructuring on lira woes

Turkey’s banks want regulators to allow them to restructure troubled loans at a faster pace as they seek to deal with the impact of a plunge in the lira on borrowers’ ability to pay.

The country’s main banking association wants to help “corporate borrowers going through temporary repayment difficulties”, Bloomberg reported citing a draft proposal to regulators.

The plan would apply to borrowers with loans exceeding 50 million liras ($10.2 million). Restructuring would happen should lenders with exposure to at least 75 percent of the debt agree to do so, Bloomberg’s Kerim Karakaya and Ercan Ersoy said, citing the draft proposal.

Turkish banks are being lumbered with tens of billions of dollars of problem loans, some from leading industrial groups, after the lira slumped against the dollar. The lira has fallen more than 20 percent in value this year, prompting concerns for a currency crisis. Ratings agencies including Fitch have downgraded Turkish banks citing the troubled loans.

The plan envisages the establishment of a committee of lenders that for each case would be able to order steps such as asset sales, spinoffs, changes to company shareholder structure and capital injections. The restructuring would be completed within 150 days of an agreement with the borrower, according to the document.

Banks had until July 30 to approve the document, dated July 24, and regulators would have to approve it, Karakaya and Ersoy reported.

Loan restructuring in Turkey has at times been beset by delays. Bloomberg cited the case of $4.75 billion owed by the Saudi Oger, the former owner of Turk Telekom, the country’s biggest telephone company. It took two years to complete talks. The company is now being run by a special purpose vehicle under the control of banks.