Turkish companies said to seek debt restructuring as virus hits

The Turkish economy has shrunk by nearly 10 percent in the second quarter of this year due to the COVID-19 lockdown. (Reuters)
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Updated 16 September 2020

Turkish companies said to seek debt restructuring as virus hits

  • Pandemic lockdown has piled on troubles for businesses already struggling after the 2018 currency crisis

ISTANBUL: Debt-laden Turkish companies are seeking more time to repay bank loans after the coronavirus pandemic upended plans to sell assets, according to four sources with direct knowledge of the matter.

Even before the virus hit Turkey in March, firms were seeking lower rates from banks after an aggressive monetary easing campaign and since then, large and small companies are looking for further revisions to nearly all of the restructurings agreed in the past two years, according to one source.

Conglomerate Dogus was among the companies preparing for talks, according to the source, who requested anonymity.

In response to a query from Reuters, Dogus said: “Our regular and usual negotiations with banks are, as always, underway within the framework of good relations.”

Other restructuring talks involving major companies are already happening, the source said.

Businesses in Turkey, as in other parts of the world, have been hit hard by lockdowns aiming to stop the spread of the virus, with the economy shrinking nearly 10 percent in the second quarter.

But Turkish companies were already weakened by a 2018 currency crisis and some, including Dogus, Yildiz and several energy firms,  signed billions of dollars worth of restructuring deals.

Asset sales were a key part of some of those restructuring agreements but the impact of the coronavirus crisis has deterred some would-be buyers, the sources said.

Turkish conglomerate and food giant Yildiz last month announced a revision in which it paid off $600 million for its syndication credit and extended the maturity to 2030.

The company declined to comment for this story.

In February, Reuters reported some conglomerates, including Dogus and Yildiz, were in talks for cheaper loans after the central bank cut rates from 24 percent in mid-2019. The policy rate is now 8.25 percent but hikes could be in store given high inflation and a record low lira. 

While M&A activity has largely stalled this year, some deals were struck including Zynga’s purchase of Turkish mobile-game maker Peak for $1.8 billion in June. 


Oman’s bond market return a key test for reform path

Updated 21 October 2020

Oman’s bond market return a key test for reform path

  • After becoming ruler in January, Sultan Haitham made shaking up and modernising state finances a top priority

DUBAI: Oman’s return to the international bond market this week will be a test of its ability to convince investors that long-awaited fiscal reforms have started to put it on a sustainable financial footing.

Oman, rated below investment grade by all the major credit agencies, announced on Monday plans to issue bonds with maturities of three, seven and 12 years, in what would be its first global debt sale this year.

Sultan Haitham, who became Oman’s ruler in January, has made shaking up state finances one of his priorities.

But investors would like to see more concrete steps being taken and, after a further sovereign downgrade last week, may require the new bonds to offer a significant premium over the country’s existing debt.

“The new sultan has done some good things — rationalizing the number of ministries, the implementation of VAT, plans to generate additional tax revenues, and they still have sovereign assets,” said Raza Agha, head of emerging markets credit strategy at Legal & General Investment Management.

“There is positive momentum but it will take time for that credibility to build.”

According to a bond prospectus, Oman has begun talks with some Gulf countries for financial support.

“I don’t think this will actually be taken into consideration by investors unless there is a tangible announcement from Gulf countries with a tangible support package,” said Zeina Rizk, executive fixed income director at Arqaam Capital.

Oman will likely price the new three-year bonds in the high 4 percent area, the seven-year tranche in the high 6 percent and the 12-year in the mid-to-high 7 percent area, implying a premium of at least 50 basis points (bps) over its existing curve, she said.

Two other investors, who did not wish to be named, said the paper could carry a 25 bps premium over existing secondary trading levels.

Sources have previously told Reuters Oman would target over $3 billion with the new deal.

“If they take $3 to 3.5 billion, you will have a market indigestion for Oman, and I’m sure people will ask to be compensated for this risk,” Rizk said.

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