Foreign currency debt – The slide of the Turkish Lira

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Lenders with foreign hard currency loans like US Dollar and Euro to Turkish borrowers (both financial institutions and corporates) need to pay close attention to the economic and political situation in Turkey. Some lenders have been approached by borrowers to refinance existing loans and we expect that this trend will continue.

The slide of the Turkish Lira, the fact that most foreign currency debt is not hedged and a wall of repayments coming up, are factors for real concern.

Turkish lenders are also expected to undertake more debt sales in the coming days/weeks. According to the Banking Regulatory and Supervision Agency data, the amount of non-performing loan (NPL) stock has reached TL 74 billion (approximately US$ 14 billion) as of June 2018. Wholesale trade and commission-based sales generate the largest amount of NPL (4.23%) with the construction sector generating 2.85% NPL and the energy sector (generation and distribution) generating 2.32% NPL.

Lenders are advised to review their Turkish debt portfolios to address possible restructuring/ amendment requests. Another consequence of the current situation is that we may see more private equity funds and corporates buying up debt and making acquisitions in Turkey.

See here for full update.

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