Alves Kablo (Istanbul/ALVES), a manufacturer of industrial cables, has defaulted on a Turkish lira (TRY) 309.7mn ($6.4mn) Islamic sukuk bond payment, the company said on September 2.

The Ankara-based manufacturer disclosed that it was unable to meet the maturity obligation due August 28 for its TRDKTSK82660 sukuk issue. The unpaid sum comprises TRY 260mn in principal and TRY 49.7mn in periodic yield distribution. The paper was issued via special purpose vehicle KT Sukuk Varlik Kiralama.

The repayment failure comes alongside a complete breakdown in the company’s capital-raising strategy. A planned follow-on lease certificate issuance of TRY 300mn failed to attract qualified institutional investors, leaving the firm with zero proceeds from the attempted transaction and deepening a severe liquidity crunch.

Cascading financial pressures

Management cited a confluence of acute structural and operational bottlenecks for the default. In its disclosure, Alves Kablo pointed to an excessive concentration of short-term debt liabilities, delayed cash conversion from working capital and a sudden pullback by commercial lenders.

Several domestic banks have initiated reviews of the company’s credit lines, resulting in a sharp contraction of available borrowing facilities. Combined with the failure to close prospective refinancing transactions on schedule, the manufacturer found itself unable to mobilise sufficient liquidity.

Emergency capital freeze and restructuring

Following an emergency board meeting on September 2, Alves Kablo announced a sweeping emergency preservation strategy. Principal among these measures is the drastic freezing of its flagship Polatli manufacturing plant expansion.

Out of a total capital investment commitment of TRY 2.87bn for the Polatli facility, the board has deferred TRY 2.76bn in future expenditure. It preserved only the TRY 110m already paid in advance to machinery suppliers. Operational throughput across existing facilities has plummeted, running at just 40% of full capacity as of early September.

The board has also appointed a dedicated executive committee to lead debt renegotiation talks with commercial banks, KT Sukuk and bondholders.

Separately, the company said that it has fired a total of 68 employees.

Chairman in jail

The financial collapse coincides with an escalating governance crisis. In a separate regulatory filing with public disclosure platform (KAP), the company said that chairman Deniz Karamercan was formally arrested on August 10 by order of the Ankara 6th criminal (sulh ceza) court.

The company’s legal counsel filed an appeal against the detention on August 21. While a confidentiality order limits public details regarding the nature of the criminal probe, corporate operations are currently being managed by vice chairman Hikmet Alabicak.

Broader Turkish corporate outlook

Alves Kablo’s troubles reflect broader systemic friction within the Turkish corporate landscape as high interest rates constrain liquidity. While blue-chip conglomerates continue to access foreign currency debt markets, mid-sized industrial manufacturers face skyrocketing domestic borrowing costs and risk-averse institutional investors.

Alves Kablo cautioned investors that ongoing operations do not imply solvency, explicitly warning that near-term debt servicing remains subject to substantial uncertainty until binding restructuring agreements are signed with creditors.