Turkey’s Eminis Ambalaj files for bankruptcy protection amid currency crisis

Turkey’s Eminis Ambalaj files for bankruptcy protection amid currency crisis
By Akin Nazli in Belgrade September 26, 2018

With analysts looking for signs of overwhelming debt amid Turkey’s economic turmoil, Turkish packaging materials producer Eminis Ambalaj on September 25 requested that a court commence a bankruptcy protection procedure. The company disclosed the move in a bourse filing.

The company explained in its filing that the combination of a range of problems including unfavourable domestic demand conditions due to Turkey’s economic troubles, climbing financing costs due to rising FX costs and interest rates, maturity mismatching problems between its receivables and liabilities and failures in financial planning have resulted in a domino effect compelling the company to seek bankruptcy protection.

Turkish media reports suggested that a total of 47 companies in Turkey applied for bankruptcy protection in Turkey between September 1 and September 19. However, there is no available official data.

Footwear makers Hotic, Yesil Kundura and Beta were among the companies that had filed for bankruptcy protection.

Signs of major conglomerates struggling to repay their hard currency-denominated debts have set off alarm bells since the beginning of 2018. Earlier this month, an assessment by Boston Consulting Group and Turkish business group Tusiad found that of a total of $95bn poured into the Turkish electricity sector over the past 15 years by investors—largely funded by cheap credit—around $50bn was yet to be repaid.

“It should not be a surprise for [power] companies to file for bankruptcy one after the other,” a senior manager at a Turkish energy firm was quoted by Reuters as saying. “Many companies are really in a dire situation and they are in a panic to restructure,” he said.

In relation to Eminis Ambalaj, the court could rule for a temporary freezing of the company’s debt repayments for a period from three months to five months. Following the temporary freeze, the court could then rule that the company should be provided with a final period from one year to one and half years.

Eminis is continuing to operate and it expects to solve its repayment troubles via a debt restructuring process, according to its statement filed with the Istanbul stock exchange.

Turkish media are currently discussing whether current legislation allows individuals to seek bankruptcy protection.

Palliative measures
The government continues to push forward palliative measures to relieve the currency crunch faced by companies. According to a new government decree, Turkish companies are no longer required to count foreign-currency losses when assessing whether or not to file for bankruptcy.

Last week, the Banks Association of Turkey (TBB) announced that Turkey’s banks have agreed to assist businesses struggling to pay off debt amid the currency crisis.

TBB disclosed little detail about the agreement, which could mean lower loss provisions for the banks. However, it said that the deal regulates the framework for loan restructurings, with recent market developments and their impact on the Turkish economy taken into consideration.

Banks and financial institutions that have signed the agreement account for 90% of outstanding loans, and the remainder were likely to sign shortly, the TBB added.

In August, Bloomberg reported that Turkish banks have proposed rules to accelerate the restructuring of company debt and allow lenders to avoid booking problematic credit as non-performing loans.

The programme, seen by Bloomberg, would apply to loans that exceed Turkish lira (TRY) 50mn ($10.2mn) for borrowers going through temporary repayment difficulties, which are willing to repay their debts and would benefit from a restructuring.

The expected pile-up of bad loans resulting from the collapse in the value of the Turkish lira (TRY) and soaring interest rates will be addressed by measures to be unveiled by the Turkish government, Bloomberg reported on September 17 citing people with knowledge of the matter.

However, the New Economy Programme announced on September 20 did not meet market hopes that Turkey would establish a “bad bank” that would allow local lenders to transfer their non-performing loans.

President Recep Tayyip Erdogan’s son-in-law and Finance Minister Berat Albayrak reiterated on September 24 that Turkey’s government was ready to provide the required support to its banks should the need arise due to recent developments.

The CEO of Czech energy company CEZ, Daniel Benes, in June told then Turkish energy minister Berat Albayrak in a letter that the Czech energy group may have to restructure its debts related to its investments in Turkey due to the deteriorating business environment there stemming from the depreciation in the Turkish lira (TRY) and regional instability, Czech daily Lidove Noviny reported on August 27.

Arson suspected at debt-ridden factories
On August 27, MP Gursel Tekin of the Turkish main opposition party CHP said 78 factories had been hit by fire over the past six months in Istanbul alone, and it was necessary to investigate as generally the fires had broken out in lossmaking plants, with arson typically suspected.

The mounting debt problems in the Turkish energy sector were oultined by Zumrut Imamoglu, chief economist of the Turkish industry and business association Tusiad on July 11.

On July 5, unnamed people with knowledge of the plan told the news agency that Turkish energy group Bereket Enerji had hired Istanbul-based Yapi Kredi Yatirim to sell its cascaded hydroelectric power plants Goktas I and Goktas II with a combined capacity of 275MW as part of plans to pay down some of its $4bn of debts. 

Three sources were quoted by Reuters as saying on June 28 that Turkish conglomerate Gama Holding was in talks with Malaysia’s Tenaga Nasional and other potential buyers about a sale of its 50.5% stake in its Gama Enerji energy unit. The disposal would take place as part of a $1bn debt restructuring.

Ali Agaoglu, chairman of one of Turkey’s largest construction companies Agaoglu Group, on August 7 was quoted by Hurriyet Daily News as denying rumours that the company would file for bankruptcy. Agaoglu also said that the conglomerate was expecting $300mn from the sale of its two wind power plants.

On a remaining maturity basis for the next one-year period, the Turkish private sector has to repay a total of $70.5bn for its loan debts as of end-July, up from $69.6bn at end-June, according to the latest data from the central bank. The sector is obliged to pay $6.71bn in August and $7.71bn in September. The highest scheduled amounts to be paid are $9.39bn in October and $7.81bn in May 2019.

By the end of 2018, the Turkish private sector’s scheduled total loan debt repayments amount to $34.7bn.

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