April 24, 2019
By Ebru Tuncay and Birsen Altayli
ISTANBUL (Reuters) – Goldman Sachs is in talks with Turkish banks and companies to buy large distressed loans following a wave of corporate restructurings in the country last year, two sources close to the matter told Reuters.
The sources, who requested anonymity, did not specify the size of the restructured loans but said Goldman was looking at those valued in the range of $2 billion to $6 billion.
Turkish banks, grappling with fallout from a recession and a weak lira, could be interested in selling loans to bolster their stressed balance sheets and to gain access to liquidity, the sources said. One of the Turkish government’s priorities is to relieve banks of bad loans.
One of the sources said that non-performing loans specialists at Goldman Sachs Group Inc, as well as at certain large London-based banks, were in “intense talks right now” over restructured Turkish loans.
A representative for Goldman Sachs in Turkey declined to comment.
Since Turkey’s currency crisis last year, where the lira halved in value at one stage, companies constrained by the currency weakness have sought to restructure their debts.
The weaker lira, which has fallen another 10 percent this year, has made it difficult for Turkish companies to service foreign-currency debts.
“They (Goldman Sachs) are not interested in complicated situations. They are interested in good loans for which the bank could provide a relative hair cut,” or discount, a second source with direct knowledge of the matter said.
Some of the big corporate loans in Turkey that have been restructured or are being restructured include a $5.5 billion loan taken out by Yildiz Holding, which owns Godiva chocolates; a 2 billion euro ($2.2 billion) loan from restaurant group Dogus Holding; and a $4.75 billion loan for Turk Telekom’s previous shareholder OTAS.
Restructured loans make up more than 100 billion liras ($17 billion) of the loans in Turkey’s banking sector, which total 2.5 trillion lira, Finance Ministry data showed.
The non-performing loan ratio at banks rose to 4.2 percent in the wake of last year’s crisis and is expected to reach 6 percent by year-end, according to the ministry data.
The potential for big returns from distressed debt deals has already attracted attention in the financial markets.
Earlier this month, the European Bank for Reconstruction and Development said it was ready to help with Turkish banks’ non-performing loans. In March, sources told Reuters that Japan’s Orix and U.S.-based Bain Capital were in talks to buy problematic loans from Turkish banks.
“Investment banks can talk to (Turkish) banks and take over these loans with a hair cut,” a distressed asset trader in London said. “But what is important here is how much of a hair cut there will be. It may take some time to be agreed upon,” he said.
As part of a reform plan announced this month by Turkish Finance Minister Berat Albayrak, loans in the energy and construction sector would be taken off banks’ balance sheets.
The Treasury will also issue 5-year debt instruments worth a total of 3.7 billion euros to strengthen the capital of state banks, it said on Monday.
(Writing by Ali Kucukgocmen; Editing by Jonathan Spicer and Jane Merriman)