LONDON, May 23 (LPC) - Banks are set to take majority control of Turk Telekom in a debt restructuring that will see them take over Turkish holding company Otas, which owns a 55% stake in Turk Telekom, banking sources said on Wednesday.
A co-ordinating committee of the lenders has agreed a restructuring plan, which will be presented to the wider lender group at a meeting this week, one source close to the situation said.
“Lenders will hold a bank meeting to agree the deal which will be implemented in June,” the source said.
Otas, which was set up by Dubai headquartered Oger Telecom in 2005 to buy the stake in Turk Telekom, has failed to make at least three $290m loan repayments since September 2016 on a US$4.75bn loan.
Otas has struggled to repay the loan due to the depreciation in the Turkish lira. Both Oger Telecom and Turk Telekom raise revenue in lira, which is then converted into US dollars.
Rating agency Standard & Poor’s warned on Tuesday of growing concern that the weakening lira could “potentially” cause a further downgrade of its BB- rating of Turkey’s sovereign debt.
In a media statement on Tuesday, Turk Telekom said that no official notification has been made to it on the process or outcome of the plan.
“In the event of an official notification to our company on this matter, the public will be promptly informed within the scope of the related legislation,” Turk Telekom said.
Otas signed a US$4.75bn loan in May 2013 with a group of local and international banks, which was Turkey’s largest corporate loan at the time. Shares in Turk Telekom were pledged as collateral against the loan.
Negotiations around a potential sale or a loan restructuring began over a year ago. Saudi Telecom Company and Qatari telecom company Ooredoo initially stepped forward as rival bidders, but the focus is now on restrucuring.
Under the restructuring plan, lenders will take control of Otas and its underlying 55% stake in Turk Telekom before reinstating the US$4.75bn of loans, with a view to selling the Turk Telekom stake, the source said.
“No one lender will be in control,” he said.
Oger Telecom did not reply to a request for comment. Construction company Saudi Oger, Oger Telecom’s controlling shareholder, closed in July 2017 amid a slowdown in Saudi’s construction sector and delays in government payments.
Saudi Telecom Company, which acquired a 35% stake in Oger Telecom in 2008 from Saudi Oger, did not respond to a request for comment.
The loan was underwritten and arranged by mandated lead arrangers and bookrunners Akbank, BNP Paribas, Citigroup, Deutsche Bank, Garanti Bank and JP Morgan.
A further 23 banks joined in syndication, who will become joint owners going forward if the restructuring plan is agreed.
Restructuring advisers Houlihan Lokey has been mandated by Otas to advise on the situation, while lenders have appointed Lazard.
Lazard and Houlihan Lokey declined to comment. (Editing by Tessa Walsh)