Banks Said to Reject Saudi Telecom Bid to Resolve Debt Issue

  • Lenders said to balk at taking losses on $4.75 billion loan
  • Saudi Telecom said to have offered to lend Otas $160 million

Banks rejected a Saudi Telecom Co. plan to resolve a dispute over a missed payment on a $4.75 billion loan at a Turkish unit, prolonging a five-month impasse on the debt, people with knowledge of the matter said.

The lenders turned down the plan because it involved taking a loss on the loan, three people said, asking not to be identified because talks are private. Saudi Telecom’s plan envisaged lending about $160 million to its Otas unit -- which missed the payment -- and also buying a direct stake in the business, they said. At present, the Saudi company only owns an indirect stake in Otas.

Otas -- which owns 55 percent of Turk Telekom -- failed to make a $290 million repayment in September on the loan, Turkey’s biggest syndicated borrowing. A slump in the lira led to a decline in the dollar value of dividends Otas receives from the phone company and had counted on to help repay the loan, a person with knowledge of the matter said in October.

Otas has another installment on the loan due in March, according to one of the people. In 2016, Turk Telekom reported its first loss since 2005, implying it won’t pay any dividend to shareholders this year.

Turkish lender Akbank has about $1.5 billion in exposure to the loan -- the most of any bank -- while Garanti Bankasi lent about $1 billion, people with knowledge of the matter said in October. Akbank and Garanti are among six book-runners on the loan, which dates to 2013.

Akbank Exposure

“Akbank is known to have a significant exposure to the Turk Telekom loan, thus making this news a negative catalyst,” Duygun Kutucu, a banking analyst at Istanbul-based TEB Investment, said in e-mailed comments. “There is a possibility that Akbank may need write down this debt. The news is also negative for Garanti.”

Shares of Turk Telekom, Turkey’s biggest phone company, fell as much as 1.7 percent to 5.74 liras in Istanbul, the biggest decline since Feb. 2. Akbank shares pared gains of as much as 1.3 percent to trade 0.6 percent higher at 8.99 liras as of 4:44 p.m.

No one was immediately available to comment at Akbank.

Saudi Telecom indirectly owns a stake in Otas through its 35 percent stake in Oger Telecom. Lebanon’s Hariri family own the remainder of Oger Telecom. The Turkish Treasury holds a 25 percent stake in Turk Telekom, while the country’s newly-founded wealth fund owns 6.7 percent.

A spokesman for Saudi Telecom declined to comment. Oger Telecom, which owns Otas, declined to comment.

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