Lazard to Rejig Loan for Stagecoach Boss's Turkish Venture

(Bloomberg) -- A group of lenders including the European Bank for Reconstruction and Development hired Lazard Ltd. to manage the restructuring of a $500 million loan for an Istanbul ferry company part-owned by Stagecoach Group Plc founder Brian Souter.

The banks, including several local firms, gave the mandate to New York-based Lazard on Tuesday, according to Necmi Riza Bozanti, chairman of the company, Istanbul Deniz Otobusleri AS. He favors turning the debt into a lira-based liability, he said.

The ferry operator, which is also known as IDO, is the latest in a string of Turkish borrowers to run into problems with their foreign debt following a decade-long binge on cheap dollar borrowing and then a slump in the lira.

Turkish non-financial companies had foreign-exchange assets of $116 billion at the end of July, but liabilities of more than $333 billion, according to central bank data. This mismatch leaves the country -- and its financial system -- vulnerable to any sustained weakening in the local currency.

“Because of the currency mismatch in our liabilities and revenues, we saw that it’s necessary to restructure our debt to turn it into a lira-based liability,” Bozanti, a former banker, said Wednesday in a phone interview. “It doesn’t mean that we have difficulty in repayments. We have always paid back our loans,” he said, adding that the company is doing the restructuring so it can conduct business “with a clear outlook going forward.”

Bloomberg reported Tuesday that IDO would soon start talks with lenders to restructure $500 million of debt. IDO also hired Istanbul-based Unlu & Co. to represent it in the negotiations, Bozanti said.

Lawsuits Filed

IDO has 15 ferry boats in its fleet, serving mostly Istanbul and neighboring ports in the Sea of Marmara.

It has filed suits against the Istanbul municipality and the government, claiming it has lost business since two rivals were allowed to operate the same routes and after the government opened a suspension bridge along its most important route. IDO carries about 40 million passengers a year, Bozanti said.

Other key points:

  • The EBRD lent $150 million out of a total loan of $600 million to the venture in 2011, when IDO was taken over from the Istanbul municipality for a total auction price of $861 million
  • Souter Investments LLP, Akfen Holding AS and Tepe Holding AS each own 30 percent stakes in IDO, while Sera Gayrimenkul AS owns the remaining 10 percent
  • A recent rise in fuel prices also increased the company’s costs, Bozanti said
  • The banking group includes local lenders Turkiye Garanti Bankasi AS, Turkiye Is Bankasi AS, Denizbank AS and Turkiye Vakiflar Bankasi TAO
  • IDO has repaid a total of $450 million since the consortium took it over, Bozanti said; this includes repayments on the $600 million loan, repaying debt carried over from the previous owners and making lease payments on ferries

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