Banks Are Poised to Take a Majority Stake in Turk Telekom

(Bloomberg) -- Creditors that provided a $4.75 billion loan to the majority owner of Turkey’s largest phone operator are in the final stages of setting up a special purpose vehicle to take over the company as they seek to resolve the country’s biggest default, people with knowledge of the matter said.

About 90 percent of banks have formally approved the formation of an SPV that would assume control of Ojer Telekomunikasyon AS, or Otas, said the people, asking not to be identified because the talks are private. The remaining 10 percent have informally agreed and have until Thursday to officially approve, they said.

Banks will get a share in the SPV relative to their contribution to the Otas loan, the people said. International lenders are forming a separate holding company for tax reasons that will hold a stake in the SPV, one of the people said. Otas borrowed the money in 2013 to refinance its acquisition of a 55 percent stake in Turk Telekomunikasyon AS.

Turk Telekom shares rose as much as 5.1 percent in Istanbul, the most since May 22, paring the decline this year to 18 percent. Akbank rose as much as 1.9 percent, Garanti 2 percent and Is Bankasi 2.7 percent.

“The market was assigning an additional discount to Turk Telekom due to the possibility of some banks selling their Turk Telekom shares,” said Akif Dasiran, an analyst at TEB Investment. “The participation of all banks into the SPV eliminates” this risk.

Loan Repayment

Banks and the companies have been locked in talks since Otas failed to pay a September 2016 installment on the loan. The slump in the Turkish lira has hit the revenue it gets from Turk Telekom’s dividends, making it more difficult to repay the dollar-denominated loan.

Saudi Telecom Co., which holds a 35 percent stake in Dubai-based Oger Telecom Ltd. that controlled Otas, isn’t opposing the plan, two of the people said. STC bought the holding for $2.6 billion in 2008.

Turkey’s government, which holds more than 30 percent in Turk Telekom through the Treasury and the Turkey Wealth Fund, is supporting the set up of the SPV, people with knowledge of the matter said in May.

Turk Telekom and STC representatives didn’t immediately respond to requests for comment.

Among the 29 Turkish and international banks that provided the original loan to Otas, Akbank TAS has exposure of $1.7 billion, Turkiye Garanti Bankasi AS almost $1 billion and Turkiye Is Bankasi AS around $500 million. BNP Paribas SA and Deutsche Bank AG are also among lenders.

©2018 Bloomberg L.P.

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