Doğuş Holding’s debt restructuring may be indicative of severe problems of Turkish economy

Turkey’s Doğuş Holding has applied this week for the restructuring of a debt burden of approximately $5.8 billion. Doğuş’s move follows the controversial, roughly $6 billion restructuring process begun by Yıldız Holding earlier this year.

While the application of Yıldız Holding is a specific situation related to the company’s own, Doğuş Holding’s application is indicative of much more severe problems facing the Turkish economy 

Ferit Şahenk, the owner of the group is no ordinary businessman for Turkey. His group owns shares in more than 300 companies and employs approximately 35 thousand staff. The brands belonging to Doğuş Group also symbolises a certain life style in Turkey, which is sometimes associated with the term ‘white Turks’. 

The Group’s investments include the Nusr-Et chain of restaurants, whose founder Nusret Gökçe i has soared to fame on the internet as “salt bae.”

Yıldız Holding’s companies are highly profitable according to their latest balance sheets, yet the groups faces problems related to its own mistakes in financial management. In essence, the group is trying to correct maturity mismatches, by turning its short-term debts into long-term. Turkey’s Banking Regulation and Supervision Agency (BDDK) recently added a new article to its communique on debt restructuring in order to provide Yıldız Holding a manoeuvering opportunity in negotiating its debts with banks. 

Doğuş Holding’s demand, on the other hand is totally different as it asks debt restructuring required because of company’s recent losses and problems arising from the depreciation of the Turkish lira. Doğuş Holding, therefore has had difficulty in paying its debts and its demand should be evaluated according to the ‘vis major’ clause in BDDK’s communique. This clause regulates debt restructuring needed due to the country’s macroeconomic problems and its implementation would require also a political will, which, in turn would imply confirming the failure of the government’s economic policies. 

Recently, Saudi and Lebanese partners of Turkish Telekom requested debt restructuring for Telekom’s $4.75 billion debt, by referring to the ‘vis major’ clause. Their demand was rejected on the grounds that it would constitute a precedent and would create a wave of bankruptcy that would overturn all balances in the economy.