Hariris Said in Sale Talks to Avoid Default on Turkey Loan

  • Oger stake said to be on offer after missed payment on debt
  • Akbank, Garanti said to have combined $2.5 billion exposure

Lebanon’s Hariri family has begun talks to sell a stake in their Dubai-based telecommunications unit as they seek to avoid default on a $4.75 billion loan, according to two people with direct knowledge of the matter.

The Hariris are reaching out to potential buyers after a company they own in Turkey failed to pay an installment of $290 million due in September and was given an extension until the end of October to resolve the matter, the people said, asking not to be named because the discussions are confidential. The loan is linked to the family’s purchase in 2005 of a majority stake in Turk Telekomunikasyon AS, Turkey’s biggest phone company.

The family has requested an additional extension to the end of November to make a payment as they seek to raise funds via a stake sale, the people said. Three bidders including a telecoms operator not based in Turkey and a company from Qatar, are currently in talks to buy part of Oger Telecom Ltd., which the Hariris own along with Saudi Telecom Co., one of the people said.

The troubled loan was the biggest syndication in Turkish history when it was issued in 2013, with 29 participants that included all of the country’s largest lenders, as well as international banks including Citigroup Inc., JPMorgan Chase & Co. and Deutsche Bank AG. Turkey’s Akbank TAS has about $1.5 billion in exposure to the loan, while Turkiye Garanti Bankasi AS lent about $1 billion, according to one of the people. Akbank and Garanti were among the six book-runners and mandated lead arrangers on the loan, according to a statement from the borrower. 

Share Moves

Turk Telekom rose as much as 2.2 percent to 5.96 liras in Istanbul, the highest level since Sept. 2 on a closing basis. Garanti fell as much as 1.5 percent to 8.29 liras and Akbank declined as much as 1.9 percent to 8.17 liras. The Turkish Treasury owns around 30 percent of Ankara-based Turk Telekom, which provides fixed, mobile and broadband services in the country. The remainder is traded on Borsa Istanbul.

“While Oger’s payment problems does not directly have much to do with Turk Telekom, they were weighing on the stock’s performance,” Behlul Katas, an analyst at Istanbul-based Deniz Invest, said by phone. “The prospect that this pressure may be removed is helping improve investor sentiment. That said, despite the market’s initial enthusiasm; a sale is unlikely to impact the company’s fundamentals.”

A refinancing of the 2013 debt is possible after the shareholder structure of Oger became clearer, one of the people said. Ojer Telekomunikasyon AS, the special purpose vehicle unit owned fully by Oger Telecom and set up to acquire the 55 percent Turk Telekom stake, took the 2013 facility to refinance an earlier loan used to purchase the stake. Ojer, also known as Otas, pledged its holdings in Turk Telekom as collateral to borrow the loan, one of the people said. Otas had repaid about $500 million on the loan until the missed payment, people familiar with the deal said on Oct. 12.

No Guarantees

A senior Akbank executive, who asked not to be identified because of the sensitivity of the matter, declined to comment. Garanti also declined comment via its public relations office, as did an executive at Ojer who asked not to be identified.

“We do not expect news on media related to one of our shareholders Ojer Telekomunikasyon to have any impact on our daily operations, commitments or liabilities,” Turk Telekom said after reports of the missed loan repayment on Oct. 12. “Financing agreements signed by Turk Telekom and its subsidiaries do not include cross-default provisions in relation to its shareholders missing their payments on their liabilities. Otas is not guarantor for any of our financing agreements. Our company does not have any guarantee or pledge in favor of Otas.”

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