The FX-denominated debts remain a big concern for the markets. The Turkish government continues to push forward palliative measures to relieve the currency crunch faced by companies. Restructured foreign currency loans in Turkey are to be converted to Turkish lira (TRY) denominations at the central bank exchange rate in force on the day of the restructuring, according to a presidential decree issued on October 11.
Meanwhile, local media each day report companies from across a wide range of different sectors applying to Turkish courts for bankruptcy protection. Greater numbers of individuals are also seeking bankruptcy protection at local courts. Gazi Aykiri, head of the Turkish Retirees Association (TUED), said on October 11 that 20mn retirees should also have the right to apply for bankruptcy protection.
Construction firms Ceylan Insaat, Kesmar Insaat, Nafia, Nuhoglu, Palet Insaat, Ozler Group; logistics company KSN Nakliyat; hospital operator Aldan Hastanesi; machinery producers Delta Makina and Teksan Makina; food producer Yorsan, owned by Abraaj Group and Turkey’s 214th largest industrial producer according to the Istanbul Chamber of Industry (ISO); textile company Aslan Tekstil; and tourism company Alkoclar Otelcilik are among the companies that have applied for bankruptcy protection, according to media reports.
Aslan Tekstil is owned by Nilgun Ok’s brother, according to local media. Ok is a ruling coalition party AKP MP and local press reported Aslan Tekstil’s bankruptcy protection application one day after Ok claimed there was no economic crisis in Turkey.
Alkoclar Otelcilik is owned by famous veteran actress Hulya Kocyigit’s son-in-law, also according to local media reports. Kocyigit was recently appointed to the Culture and Art Policies Board of the Turkish Presidency.
Trabzonspor withdraws from league
On October 2, sports club Trabzonspor announced that it had withdrawn from the basketball league due to rising exchange rates.
Borsa Istanbul said on October 1 that it has decided to warn technical contractor Ae Arma Elektropanc over its failure to redeem its bond repayments on the due date.
The footwear manufacturing industry has almost entirely collapsed with well-known brands Hotic, Yesil Kundura, Beta and Sabo along with footwear chemicals producer HAFF Kimya among the companies that have filed for bankruptcy protection.
Packaging materials producer Eminis Ambalaj on September 25 requested that a court commence a bankruptcy protection procedure.
Debt restructurings are also increasing. One of the latest conglomerates restructuring its debt is Arkas Holding which recently said in an internal e-mail to its personnel that it has concluded debt restructuring talks with lenders, according to Bloomberg.
There is no available official data on bankruptcy protection applications or debt restructurings. However, Nedim Turkmen, a columnist for local daily Sozcu, speculated on October 1 that the number of bankruptcy protection applications had already passed 3,000 and was expected to reach 5,000-7,000 by the end of the year, although Turkmen did not cite any sources.
Large companies 'restructuring $24bn'
The total debt being restructured by Turkey’s large companies is estimated to stand at around $24bn, according to Bloomberg.
Signs of major conglomerates struggling to repay their hard currency-denominated debts have set off alarm bells since the beginning of 2018. Last 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.
Yildiz Holding, which concluded the country’s biggest ever loan restructuring worth $6.5bn back in May, was exploring a sale of Godiva chocolate’s Japanese business in a deal that could fetch around $1.5bn, two sources familiar with the matter told Reuters.
Dogus Holding, which has been in debt restructuring talks with local lenders for months, was seeking buyers for luxury hotels across southern Europe, Bloomberg quoted people with knowledge of the matter as saying on October 10.
Meanwhile, Turkish lenders are managing to renew their syndicated loans albeit at double the cost. The latest announcement came from TEB with the lender saying on October 11 in a bourse filing that it obtained a 367-day syndicated loan, consisting of two tranches of €433.5mn at a cost of Euribor+2.65% and $33.5mn at a cost of Libor+2.75%.
Exposure of European lenders
The combined exposure of European lenders to Turkish private sector’s long-term foreign loans also declined by 2% m/m to $109bn at end-August, central bank data showed on October 16. UK-based lenders continued to top the list, with their total exposure showing a small rise from $29.53bn at end-July to $29.6bn at the end of the eighth month. Second-placed Germany’s exposure inched down by 1% m/m to $22bn at end-August.
US lenders’ total exposure to the Turkish private sector’s foreign loans also rose slightly from $19.88bn at end-July to $19.94bn at end-August, keeping the US in third position for the level of exposure.
Of lenders, the European Bank for Reconstruction and Development (EBRD) still had the largest exposure, at $9.8bn, higher than $9.7bn at end-July.
The data also showed Turkish banks’ outstanding long-term loans declined further by 1% m/m to $93bn at end-August, with $30bn of that made up of bonds.
Non-financial private companies’ total outstanding loans edged down 1% m/m to $111bn at end-August, including $92bn worth of bank loans, $11bn worth of loans from parent companies or affiliates, $461mn in trade credits and $7.53bn in bonds.
Short-term loans down 10% m/m
Statistics from the central bank also showed that the private sector's short-term loans volume declined by 10% m/m to $17bn as of end-August, including $12bn worth of loans received by Turkish lenders.
The IFC has the largest sole exposure when it comes to the Turkish private sector’s outstanding short-term loans. It jumped to $1.5bn at end-July from $372mn at end-June and it stood at $1.4bn at end-August.
The UK also topped the list of countries with the highest exposure to the Turkish private sector’s short-term loans as its exposure declined from $4.03bn at end-July to $3.8bn at end-August. It was followed by the Netherlands with $2.53bn, significantly down from $3.24bn at end-July. European countries’ total exposure to the short-term loans stood at $13.7bn, sharply down from $15.4bn as of the end of July.
On a remaining maturity basis for the next one-year period, the Turkish private sector has to repay a total of $68.7bn for its loan debts, down by 3% m/m compared to $70.5bn at end-July.
The sector was obliged to pay $8.49bn in September. The highest scheduled amount to be paid was $9.97bn in October.
By the end of 2018, the Turkish private sector’s scheduled total loan debt repayments amounted to $29.5bn as of end-August and to $21bn as of end-September.
Private sector long-term foreign debt moved up 9% y/y to stand at $222bn as of end-2017 from $202bn at end-2016, while the short-term debt rose by 28% y/y to $18bn as of end-2017 from $14bn a year previously.