Yildiz $7 Billion Restructuring Bid Adds to Turkish Bank Woes

Turkish cookie giant Yildiz Holding AS’s unexpected request to restructure as much as $7 billion in loans may mark the end of a lending frenzy that’s been a boon to the nation’s growth.

The request by one of the country’s largest and most successful companies spurred lenders into emergency negotiations after Yildiz asked that they restructure its debts by getting together and issuing a new loan, which would be the nation’s largest ever. Many of the 10 banks involved are already in talks over a $4.8 billion default by Otas, which struggled to make dollar-denominated repayments on its loan for telecom operator Turk Telekom.

“For all sides, the optimal solution is restructuring,” said Inan Demir, an economist at Nomura International Plc in London. “However, even if the Otas and Yildiz Holding loans are going to be restructured without causing an equity loss in the banking system, it will lead banks to be more risk-averse on new loans.”

Yildiz is seen as one of the nation’s most stable groups. The company traces its roots back to a small Istanbul shop in 1944 that now owns more than two dozen companies including international brand names such as Godiva Chocolates and United Biscuits. In its request for restructuring, Yildiz cited difficulties with an existing finance structure that requires it to make monthly loan repayments that reached more than $1 billion in February.

Record Debt

Turkey’s corporate sector has to repay a record $326 billion in foreign-currency debt and banks have been extensively restructuring loans amid political and geopolitical turmoil that’s battered the local currency. Compounding the risk is a government-backed lending spree that’s pushed the banks to their limits and sent their loan-to-deposits ratio soaring to 127 percent, curtailing their ability to lend.

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