Corporate debt stress-ridden Turkey is running out of time - analysis

Ankara is either not aware of the seriousness of the corporate debt stress, or is yet to study examples of solutions abroad as it is only preparing to implement a stress tests to gauge the magnitude of bad loan problem in the banking industry, Para Analiz website wrote.

Turkey’s Treasury and Finance Minister Berat Albayrak announced the aforementioned test may commence as early as Monday following a crash of the Turkish lira that is causing wide-spread damage to the massively dollarized or F/X indexed economy.

The lira has dropped by 40 percent against the dollar this year, forcing the central bank to raise interest rates by more than 10 percentage points to 24 percent in an effort to ease the pressure on Turkish lira and to tame inflation.

Thousands of companies, including construction firm Sur Yapi, the site recalled, used foreign currency loans to fund their investments. Now, they are faced with an uphill battle due to the sliding lira.

Turkish President Recep Tayyip Erdogan announced a ban on using foreign currency for a raft of contracts, however, analysts note this is not enough to overcome the £254bn ($337bn) ucorporate debt denominated in foreign currency, the site noted.

“It doesn’t address the core problem – it simply shifts the FX burden from one group of economic actors to another,” Para Analiz quoted Atilla Yesilada, an Istanbul-based analyst at consultancy GlobalSource Partners, as saying.

Companies such as construction giant Sur Yapi have maintained an exchange rate for its shopping centre in Bursa for the past three months to TL.4.85 to the euro, despite the country’s plummeting currency.

While they do everything possible to be fair towards tenants and the local economy, companies are warning that they must also consider the need to service its foreign currency investment loan.

Retailers are already feeling the pressure; two Turkish aluminium companies, Teknik Alüminyum and Burak Alüminyum, both among Turkey’s top 100 exporters, received bankrupt protection in early September.
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