EBRD extends 5-year loan of up to €7mn to Turkish NPL asset management firm Dunya Varlik

By Akin Nazli in Belgrade October 20, 2023

The European Bank for Reconstruction and Development (EBRD) has extended a loan of up to €7mn to Turkey's Dunya Varlik Yonetim, the investment bank said on October 19.

The facility has a maturity of five years with a grace period of two years. It will be provided in two tranches. Tranche 1 of the Turkish lira (TRY) equivalent of €4.2mn will be committed. Tranche 2 of the TRY equivalent of up to €2.8mn will be uncommitted.

Dunya will use the loan to acquire portfolios of non-performing loans (NPLs) in Turkey amid “a challenging macroeconomic environment including hyperinflation, the weakening of Turkish Lira as well as the impact of the recent earthquake.”

The stock of NPLs represents one of the important systemic risks to financial stability in Turkey, the EBRD noted.

The loan is structured as a response to the expected increase in NPL market activity in Q4 and across 2024, according to the lender.

In 2022, the EBRD extended a TRY 100mn ($7mn) loan to Dunya with a maturity of five years and a grace period of two years.

Prior to 2022, the investment bank bought a total of TRY 76mn (€12mn) of securities in relation to seven bonds sold by Dunya.

It provided the company with TRY 220mn in loans and mobilised TRY 60mn in parallel financing from ICBC Turkey (a unit of Industrial & Commercial Bank of China/ICBC/Shanghai/601398).

By end-June, Dunya Varlik had sold a total of TRY 1.7bn worth of bonds, up from TRY 1bn of seven bonds as of end-2022.

Dunya Varlik Yonetim, launched in 2008, is the second largest NPL and distressed asset management company in Turkey with a 20% market share based on the unpaid principal balance.

As of end-August, Dunya’s total assets stood at TRY 3bn and its total equity stood at TRY 2bn.

Dunya is currently the EBRD's only NPL asset management partner in Turkey.

There are 23 active asset management companies in Turkey.

Currently, Turkey-focused venture fund Actera Group, via its Vector Holdings S.a.r.l. and Vector Investment Holdings S.a.r.l., controls an 88% stake in Dunya Varlik while the EBRD holds the remaining 12%.

In 2011, the EBRD acquired its stake, providing equity and credit financing of TRY 100mn to the company.

The EBRD is the largest single-entity creditor and institutional investor in Turkey. Since 2009, it has invested €18bn in the country. Its outstanding portfolio valued at €7bn in Turkey is the largest portfolio the EBRD has in terms of the 38 economies in which the bank invests.

In 2022, the development bank invested a total of €1.6bn in Turkey. As a result, Turkey was the lender's top investment destination for the third year in a row.

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