Jul 05 2018

Banks to take over Turkey's top telecoms firm on bad debt

Turkish and international banks are poised to take control of Turk Telekom, Turkey’s biggest telephone company, due to billions of dollars in unpaid debts.

The creditors, who are owed $4.75 billion by Oger Telecom of Saudi Arabia, are about to set up a special purpose vehicle to acquire the company as they try to resolve Turkey’s biggest-ever debt default, Bloomberg said, citing people with knowledge of the matter.

Akbank TAS, which is owed $1.7 billion, Garanti Bank, owed almost $1 billion, as well as Deutsche Bank and BNP Paribas, are among 29 banks that provided the original loan. Saudi Telecom Co., which owns 35 percent of Dubai-based Oger, isn’t opposing the plan, Bloomberg’s Ercan Ersoy reported. Each creditor will get a share of the SPV according to what it’s owed.

Some companies in Turkey are struggling to repay their foreign currency debts after the lira slumped against the dollar, forcing banks to restructure some of the debt. The credits are part of a stockpile of more than $220 billion in foreign currency debt owed by corporates that are also weighing on Turkey’s credit rating. Moody’s and Standard & Poor’s have highlighted the risks posed to the country’s economy by the lending as they cut Turkish sovereign debt deeper into junk over recent months.

Oger borrowed the money back in 2013 to refinance the acquisition of its 55 percent stake in Turk Telekom, purchased in 2005 with then-partner Telecom Italia. The sale of Turk Telekom was a key part of a privatisation program conducted by then-Prime Minister Recep Tayyip Erdogan's government.

About 90 percent of the banks who approved credits to Oger Telecom have formally agreed to the formation of the SPV that would assume control of Ojer Telekomunikasyon, or Otas, Oger’s Turkish unit, the people said on condition of anonymity because the talks are private. The remaining 10 percent have informally agreed and have until Thursday to approve the plan officially, Ersoy wrote.

News of the takeover agreement comes little more than a week after Erdogan was re-elected as president on a pledge to continue with policies that have brought annual economic growth of more than 7 percent over the past three quarters. But government stimulus and the lira's decline of about 20 percent this year have also pushed up inflation, which surged to more than 15 percent in June. In turn, that has forced banks to increase the interest rates they charge companies and consumers to borrow in lira.

The Turkish government, which owns about a third of Turk Telekom, is supporting the establishment of the SPV, according to people with knowledge of the matter that Bloomberg spoke with in May.