Turkey's plan to clean up some $13 billion in bad energy loans, one of the ...
ISTANBUL - Turkey’s plan to clean up some $13 billion in bad energy loans, one of the worst hangovers from last year’s currency crisis, is taking shape even as some banks hold out for the government to agree to safeguards and higher electricity prices.
How quickly and credibly it can execute the energy-sector bailout could determine whether the largest economy in the Middle East steadies its currency and returns to growthlater this year, or it fails to gain the confidence of investors and risks another crisis that roils other emerging markets. That go-slow approach was evident in a meeting with Goldman Sachs, Deutsche Bank and investors such as Bain and Cerberus in Istanbul on Thursday, at which three attendees said Turkish bankers were in no rush to sell their non-performing loans .
As part of it, the government would raise electricity prices by some margin though not as high as banks urged, and the fund-of-funds would be structured in a way that pools the gas and coal plants for a possible sale once the economy and energy demand recover, two separate sources said. Only about $16 billion of the total $400 billion of loans in Turkey’s banking sector had been restructured as of March. Some analysts expect its NPL ratio to double by year-end to 8%.Adding urgency to the bailout of gas and coal companies, Turkey’s currency continues to fall after having shed nearly 40% of its value against the dollar since 2017. The companies took on some $70 billion in foreign-currency loans over the last decade, one third of which have been repaid.
He said that if banks need cleaning up and re-capitalizing, that is a good thing for the economy even if it costs money. “The flip side is if there is a big cost then that ... can weigh on the sovereign credit,” Parker said. A change under consideration is legislation allowing lenders to count any debt write-down against taxes, three sources said, while two of them said a similar law could be drawn up on recapitalization of such assets.
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