September 3, 2018 / 11:00 AM / 3 months ago

Akbank aims to refinance loan by end September

LONDON, Sept 3 (LPC) - Turkey’s Akbank is expecting to sign a loan refinancing in late September, as Turkey’s deepening financial crisis hampers banks’ attempts to refinance US$6.4bn of syndicated loans before the end of the year.

The new loan will replace a US$930m equivalent one-year loan which matures at the end of September, the bank said in an emailed statement.

Akbank’s loan refinancing was launched in early August, along with deals for Turk Ekonomi Bankasi and Turk Eximbank, but the deals have been delayed by Turkey’s financial crisis.

Akbank signed a US$1.15bn deal on August 15 last year, which also included a US$205m two year tranche, but the deal was not executed until September, the bank said.

“The syndicated loan is in progress in line with its regular calendar. The total amount maturing is US$930m. It will mature at the end of September 2018. The new loan has been scheduled to be signed in late September,” Akbank said in the statement.

On August 30 rating agency Fitch said that the continued depreciation of the lira in August has heightened the risk for Turkish banks and could lead to further negative rating actions by the agency.

The lira has declined 40% this year and hit a record low of 7.24 to the US dollar on August 16.

Turkey has around US$179bn of external debt maturing in the year to July 2019, US$146bn of which is owed by the private sector, especially banks, according to JP Morgan.

The currency’s collapse has raised fears that companies may face difficulties repaying hard currency debt amid a sharp contraction in Turkey’s economy.

FIRST OUT

Akbank is usually the first Turkish bank to complete a loan in the second round of Turkey’s biannual bank loan refinancings in August, and its deal sets a pricing benchmark that other Turkish banks follow.

After weeks of assessing the fallout from Turkey’s financial crisis, lenders are currently seeking approvals from their credit committees, a banker on the deal said.

“Discussions are ongoing and we are continuing to work towards an end of September deadline. Banks are beginning to move forward with (credit committee) approvals,” he said.

Banks are, however, demanding higher pricing on Turkish banks’ second loan refinancings to compensate for increased Turkish risk.

“I think there is a deal there, but it needs to shape up from the original terms,” a second banker said.

When Akbank’s loan was launched in early August, it was priced at 150-160bp on the euro and dollar tranches respectively – around 30bp higher than its first US$1.24bn equivalent deal which closed in March.

Bankers are calling for higher pricing as the continued financial crisis shows no signs of abating. If Akbank does not agree a refinancing, the loan may have to be reduced or repaid, bankers said.

“The bank said they had allocated funds for repayment,” the second banker said.

According to Fitch, a scenario in which banks have to pay down foreign debt would reduce the central bank’s foreign currency reserves and add to pressure on the lira, policy interest rates and economic growth. (Editing by Tessa Walsh)

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