Saudi Telecom Said to Offer Loan to Settle Turkey Debt Issue

  • Saudi Telecom said to provide $160 million to Turkey unit
  • Deutsche Bank sees zero dividends from Turk Telekom in 2017

Khaled Biyari, chief executive officer of Saudi Telecom Co.

Photographer: Jason Alden/Bloomberg

Saudi Telecom Co. offered a loan of about $160 million to a subsidiary that missed a repayment on $4.75 billion of debt last year, according to people familiar with the matter.

The funds would allow Otas, a special purpose vehicle formally known as Ojer Telekomunikasyon AS that owns 55 percent of Turk Telekomunikasyon AS, to cover an interest payment that was due in September, the people said, asking not to be identified as the information is private. Otas missed a $290 million repayment -- including principal -- as a slump in the lira led to a decline in the dollar value of the dividends that it receives from Turk Telekom, a person familiar said in October.

Saudi Telecom indirectly owns a stake in Otas through Oger Telecom and is considering buying a direct stake to help resolve the debt issue, the people said. Lebanon’s Hariri family, which owns Oger Telecom through its Saudi Oger business unit, has started to sell assets to deal with mounting debt, agreeing to a deal to sell a 20 percent stake in Jordan’s Arab Bank in December. Saudi Telecom owns the remaining 35 percent in Oger.

“If the acquisition by STC moves forward, we think this would be a positive for Turk Telekom as it would be in the hands of a stronger shareholder,” Trieu Pham, a credit strategy analyst for emerging markets at MUFG Securities in London, wrote in e-mailed comments on Wednesday. “Moreover, we think that such an acquisition would avoid a change of control event.”

Turk Telekom shares swung between gains and losses on Thursday after jumping 0.9 percent on Wednesday to the highest level since Nov. 29. The stock was trading unchanged at 5.55 lira as of 11:36 a.m. in Istanbul.

A spokesman for Saudi Telecom declined to comment. Otas directed queries to Oger Telecom which declined to comment.

No Dividend

Turk Telekom will probably not be able to pay dividends this year for the first time since 2009 because of foreign-currency losses, Deutsche Bank AG analyst Koray Pamir said in a research report. The bank trimmed its net income forecast by 7 percent to 1.4 billion liras ($369 million) and expects the company to post a net loss of 483 million liras for 2016.

The failure of the loan repayment was also mainly due to the lira’s decline against the dollar, which eroded the dividends that Ojer Telekom are dependent on for the payment. The currency has slid 22 percent since the beginning of 2016, the biggest decline among 24 emerging markets tracked by Bloomberg.

— With assistance by Deema Almashabi

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