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LONDON, July 5 (Reuters) - Lenders to Dubai-based Oger Telecom are set to mandate financial restructuring advisers ahead of a potential restructuring of the group’s US$4.75bn loan that signed in May 2013, banking sources said.
The loan, agreed by a special purpose vehicle called Otas that was set up by Oger Telecom to acquire a 55% stake in Turk Telekom in 2005, was the biggest by a Turkish borrower when it signed.
Otas used its shares in Turk Telekom as collateral against the loan, which was underwritten and arranged by mandated lead arrangers and bookrunners Akbank, BNP Paribas, Citigroup, Deutsche Bank, Garanti Bank and JP Morgan. Houlihan Lokey has been appointed by Otas to advise on a debt restructuring and lenders are in the process of appointing advisers.
“We have been talking to the lenders -- they have not mandated anyone yet, but they are getting there,” said one financial restructuring adviser.
This follows two missed payments of US$290m on the loan – one in September 2016 and another one in March this year.
A coordinating committee of lenders is in place, which comprises three Turkish banks -- Akbank, Garanti and Isbank, according to the restructuring adviser.
“This will be a Turkish-driven solution, there are no international banks on the co-com,” he said.
Akbank and Garanti have a loan exposure of around US$1.5bn and US$960m, respectively. That represents around 3.2% and 1.8% of both banks’ gross loans as of FY16, respectively, according to company filings of both banks, MUFG said in a report in April.
Otas has had a restructuring plan in place for the last six months and is waiting for the lenders to appoint a restructuring adviser before talks can begin, a source close to the situation said.
“Turkish banks are not used to these restructuring situations, it is easier if they appoint an adviser,” he said. A&E ANSWER?
The most likely outcome of debt negotiations is an amend and extend of the loan, with the Turkish banks unlikely to want to takeover the underlying assets of Otas –which is the 55% stake in Turk Telekom - in a debt for equity swap, the sources said.
“I think this will just be resolved quite quietly – given what the Turkish banks are owed it might just be amend and extend agreed over the summer,” the restructuring adviser said.
The problems repaying the debt has stemmed predominately from the depreciation in the Turkish lira over the last year. Both Oger Telecom and Turk Telekom raise revenue in Turkish lira, which is then converted into US dollars.
“Otas is now worth less because of these FX difficulties -- what was a US$7bn-$8bn asset with US$4.75bn of debt is now only worth US$3.5bn-$4bn,” a second restructuring source said.
The loan has recently been priced at between 73.25%-75.25% of face value on Europe’s secondary loan market, according to Thomson Reuters LPC, although it is unclear how much if any has actually sold.
Oger Telecom and Turk Telekom did not reply to a request for comment. (Editing by Chris Mangham)