China's Tatwah Among Companies in Talks to Buy Turk Telekom Owner

(Bloomberg) -- China’s Tatwah Smartech Co. is among parties in talks to purchase a special-purpose vehicle established to own a majority stake in Turk Telekom, Turkey’s largest phone company, according to four people with direct knowledge of the matter.

The discussions are ongoing and no final agreements have been reached on a sale, the people said, asking not to be named because the talks are private. Tatwah didn’t immediately respond to requests for comment made after work hours in China. The three largest Turkish banks that would be selling stakes also didn’t comment.

The special purpose vehicle is being created by Turkish banks to control the shares as part of a Turkish government-backed solution after Turk Telekom’s owner failed to make payments starting in 2016 on its $4.75 billion in loans. The loans were taken out in 2013 by Ojer Telekomunikasyon AS, or Otas, to fund its acquisition of Turk Telekom. Banks will get a share in the special purpose vehicle relative to their contribution to the Otas loan, people familiar with the plan said July 4.

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 around $500 million. BNP Paribas SA and Deutsche Bank AG are also among lenders.

Several Solutions

A sale to Tatwah is one of several possible solutions being considered, according to one of the people. Tatwah is a producer of radio-frequency identification products and semiconductor devices that’s listed on the Chinese exchange. It has an enterprise value of $1.9 billion, compared with Turk Telekom’s $5.4 billion.

Shares in Turk Telekom rose as much as 4.9 percent to 3.88 liras, their highest level since Aug. 14, before trading unchanged by 5:11 p.m. in Istanbul. The Turkish banking index climbed as much as 4 percent before paring gains to 2.5 percent.

Turk Telekom hasn’t been notified of any developments related to its shareholding, the company said in a public filing.

Spokesmen for Akbank TAS and Turkiye Is Bankasi AS declined to comment on the possible acquisition. A spokesman for Turkiye Garanti Bankasi AS didn’t immediately respond to a request for comment on Thursday. The three banks hold the largest exposure to the Turk Telekom loan.

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.

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