Turkey’s US$16bil debt at risk from lira crash

The Turkish lira was 2.1% weaker against the dollar on Monday after President Tayyip Erdogan dismissed the central bank governor, laying bare differences between them over the timing of interest rate cuts to revive the recession-hit economy.

DUBAI: Major Turkish companies, financial institutions and the government have at least US$16bil in bonds denominated in foreign currency that are due by the end of next year, data compiled by Bloomberg shows.

The amount due by the end of next year is mostly composed of debt issued by Turkish financial institutions, and includes conventional bonds and Islamic sukuk bonds valued at a minimum of US$100mil at the time of issuance.

Investors are watching closely to see whether Turkish banks and other companies will maintain access to the foreign funding they need to keep economic activity humming as the country’s currency plunges.

“So far, a currency crisis has not turned into a debt crisis,” Stuart Culverhouse and Hasnain Malik, analysts at Exotix Partners LLP, wrote in a report.

The country’s low public debt, at 28% of gross domestic product, “might be some comfort, and the country has ammunition in the form of US$98bil in official reserves,” they wrote. But given Turkey’s reliance on external finance, a currency crisis could turn into a debt crisis, they said, especially for those firms that are highly leveraged and particularly sensitive to foreign-exchange moves.

Coca-Cola Icecek AS (CCI) is first up with a senior unsecured note of US$500mil it will repay on Oct 1.

The company refinanced the securities last September to extend the maturity to 2024 at cheaper rates than previously, and now has “more than sufficient hard-currency cash” to meet its obligations, CCI said in a statement on Tuesday.

Fitch Ratings affirmed the company at BBB- this week, but kept its outlook negative in line with that of the sovereign, while pointing out all of CCI’s operations are based in emerging markets.

Next year has a heavy concentration of bonds maturing for Turkish issuers, Bloomberg data show. Lender Turkiye Garanti Bankasi AS has US$1.4bil in three bonds maturing between February and October.

The Turkish government has a sukuk of US$1.25bil that’s due in October, plus three bonds denominated in US dollars and euros, nominally valued at US$4.4bil in total, that will mature between March and November. — Bloomberg

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Business , Turkey , debt , lira


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