As the plunging lira weighs on Turkish borrowers, the nation’s banks are proposing a quicker way of resolving loans that turn sour.
In what would be the first such codified rules, the Banks Association of Turkey, which represents non-Islamic lenders, drew up a framework of principles for restructuring loans that exceed TRL 50 million ($10.2 million), according to a copy of the document obtained by Bloomberg News. TBB, as the industry group is known, declined to comment.
The programme would apply to “corporate borrowers going through temporary repayment difficulties” that are willing to repay their debts and would benefit from a restructuring, said the document, which was dated 24 July.
The TBB proposes allowing a loan to be restructured if lenders with exposure to at least 75 per cent of the total owed agree to do so. A committee of lenders could then order measures such as changes to shareholder structure and management, asset sales, spinoffs and capital injections. Restructurings would be resolved within 150 days of an agreement being reached, according to the document.
Member banks’ executives had until 30 July to respond and regulators would have to approve the proposals.
Companies have been renegotiating more than $20 billion in loans as the Turkish lira heads for its longest streak of monthly losses since an International Monetary Fund bailout in 2001. The currency’s decline has made dollar loans more difficult to repay, while lira-denominated ones have become more difficult to service due to interest-rate hikes by the central bank.
The country’s largest syndicated-loan default shows how restructurings can be delayed in Turkey. It took two years of talks before lenders that originally provided $4.75 billion to Otas, the majority owner of Turk Telekomunikasyon AS, agreed to set up a special purpose vehicle to resolve the matter.