Turkish banks may have to pay up once again as they rush to meet $6 billion (Dh22.04bn) of financing deadlines amid the country’s worst economic crisis in years.
At least nine lenders have to complete annual dollar loan syndications by year-end, leaving an industry heavily reliant on overseas funding little time and few options to conclude deals often involving dozens of global banks. Akbank Turk, Turkiye Is Bankasi and state-owned Export Credit Bank of Turkey are at the head of the queue, as they are yet to finalise deals that entered syndication in July, days before the nation’s crisis began.
“The situation is definitely worse than other crises that Turkey has been through,” said Reza Karim, a London-based credit analyst at Jupiter Asset Management. “Pricing will certainly have to be changed.”
The Turkish bank loans will provide a critical test of the nation's ability to tap overseas debt markets amid US sanctions that have cooled the economy, driven the lira to record lows and pushed yields on sovereign bonds maturing in March to about 9 per cent, according to Bloomberg. Local crises have previously forced pricing concessions by Turkish banks, which have borrowed at least once or twice a year from the same pool of overseas lenders for decades.
“We expect loan pricings to go up,” said Okan Akin, a London-based credit analyst with AllianceBernstein. “It’s only logical that every Turkish asset would have to be repriced reflecting new market realities.”
The nation’s banks traditionally get dollar loans because rates are lower than in the lira market. Local companies borrowing these funds then face a currency risk as they have to use lira revenues to repay dollar debt.
Akbank, Isbank and Export Credit Bank all marketed loans at an all-in pricing of no more than 165 basis points above benchmark rates before the turmoil began, including a margin of as much as 130 basis points for dollar commitments. The subsequent US-Turkish standoff - centred on a detained American pastor - has since sparked a rout in Turkish assets. The cost of insuring Akbank’s debt using five-year credit-default swaps has doubled since April to 684 basis points, according to CMA data.
Representatives of the three banks did not respond to requests for comments by phone and email.
Lenders may have to seek support from the government or central bank in the event of a “prolonged closure”’ of the wholesale market, or else “materially deleverage”, Moody’s Investors Service said in an August 28 note as it downgraded 20 Turkish financial institutions.
The nation’s lenders had about $186bn of foreign-currency funding as of June, equal to about 75 per cent of total wholesale funds, according to Moody’s. The banks need to refinance $77bn of foreign-currency wholesale bonds and syndicated loans, or 41 per cent of total market funding, within the next year, the ratings provider said.
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Read more:
Turkish central bank may raise rates as inflation soars to 15 year high
As Turkey's lira sinks further central bank doubles borrowing limits for banks
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Turkey’s crisis also poses risks to European lenders with investments in local banks including Banco Bilbao Vizcaya Argentaria, BNP Paribas, UniCredit and ING Groep. BBVA generates about 14 per cent of profit from a stake in Turkiye Garanti Bankasi.
Turkish banks have previously paid up to get loans done. Last year, the borrowers increased loan margins to more than 100 basis points from around 55 basis points in 2016 after a failed coup and ratings downgrades rattled markets. In 2012, they increased pricing by about 30 basis points to woo European lenders, which were then reducing exposure and increasing capital.
“Turkey has historically been able to muddle through political turmoil and raise funds,” Mr Karim said.
Still, with no sign of relations thawing with the US and continued pressure on the lira, there’s little to suggest that the country’s economic troubles will ease anytime soon. That may prompt overseas banks to reassess what were previously near-automatic rollovers of syndicated loans, Paul McNamara, a London-based fund manager at Gam UK, said on Bloomberg’s Odd Lots podcast.
“What’s really going to change now is when it’s embarrassing for a bank CEO in Europe to explain how much exposure they have to Turkey,” he said.
Separately, the increase in Turkey's energy prices is expected to continue into September, the central bank said on Tuesday, a day after official data showed annual inflation rose to 17.9 per cent in August, Reuters reported.
In its report on monthly price developments, the central bank said basic goods and energy prices were the main driver of inflation in August and there had been significant deterioration in the overall trend of core inflation indicators.
UAE currency: the story behind the money in your pockets
Our family matters legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
UAE currency: the story behind the money in your pockets
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
The specs
Engine: 4-litre twin-turbo V8
Transmission: eight-speed PDK
Power: 630bhp
Torque: 820Nm
Price: Dh683,200
On sale: now
UAE%20set%20for%20Scotland%20series
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Ukraine
Capital: Kiev
Population: 44.13 million
Armed conflict in Donbass
Russia-backed fighters control territory
THE CLOWN OF GAZA
Director: Abdulrahman Sabbah
Starring: Alaa Meqdad
Rating: 4/5
Other must-tries
Tomato and walnut salad
A lesson in simple, seasonal eating. Wedges of tomato, chunks of cucumber, thinly sliced red onion, coriander or parsley leaves, and perhaps some fresh dill are drizzled with a crushed walnut and garlic dressing. Do consider yourself warned: if you eat this salad in Georgia during the summer months, the tomatoes will be so ripe and flavourful that every tomato you eat from that day forth will taste lacklustre in comparison.
Badrijani nigvzit
A delicious vegetarian snack or starter. It consists of thinly sliced, fried then cooled aubergine smothered with a thick and creamy walnut sauce and folded or rolled. Take note, even though it seems like you should be able to pick these morsels up with your hands, they’re not as durable as they look. A knife and fork is the way to go.
Pkhali
This healthy little dish (a nice antidote to the khachapuri) is usually made with steamed then chopped cabbage, spinach, beetroot or green beans, combined with walnuts, garlic and herbs to make a vegetable pâté or paste. The mix is then often formed into rounds, chilled in the fridge and topped with pomegranate seeds before being served.
Porsche Taycan Turbo specs
Engine: Two permanent-magnet synchronous AC motors
Transmission: two-speed
Power: 671hp
Torque: 1050Nm
Range: 450km
Price: Dh601,800
On sale: now
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
Company%20profile
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In Full Flight: A Story of Africa and Atonement
John Heminway, Knopff
Company%20Profile
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BEETLEJUICE BEETLEJUICE
Starring: Winona Ryder, Michael Keaton, Jenny Ortega
Director: Tim Burton
Rating: 3/5
UAE currency: the story behind the money in your pockets
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
- Abdullah Ishnaneh, Partner, BSA Law
Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
Killing of Qassem Suleimani
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
Marathon results
Men:
1. Titus Ekiru(KEN) 2:06:13
2. Alphonce Simbu(TAN) 2:07:50
3. Reuben Kipyego(KEN) 2:08:25
4. Abel Kirui(KEN) 2:08:46
5. Felix Kemutai(KEN) 2:10:48
Women:
1. Judith Korir(KEN) 2:22:30
2. Eunice Chumba(BHR) 2:26:01
3. Immaculate Chemutai(UGA) 2:28:30
4. Abebech Bekele(ETH) 2:29:43
5. Aleksandra Morozova(RUS) 2:33:01
A new relationship with the old country
Treaty of Friendship between the United Kingdom of Great Britain and Northern Ireland and the United Arab Emirates
The United kingdom of Great Britain and Northern Ireland and the United Arab Emirates; Considering that the United Arab Emirates has assumed full responsibility as a sovereign and independent State; Determined that the long-standing and traditional relations of close friendship and cooperation between their peoples shall continue; Desiring to give expression to this intention in the form of a Treaty Friendship; Have agreed as follows:
ARTICLE 1 The relations between the United Kingdom of Great Britain and Northern Ireland and the United Arab Emirates shall be governed by a spirit of close friendship. In recognition of this, the Contracting Parties, conscious of their common interest in the peace and stability of the region, shall: (a) consult together on matters of mutual concern in time of need; (b) settle all their disputes by peaceful means in conformity with the provisions of the Charter of the United Nations.
ARTICLE 2 The Contracting Parties shall encourage education, scientific and cultural cooperation between the two States in accordance with arrangements to be agreed. Such arrangements shall cover among other things: (a) the promotion of mutual understanding of their respective cultures, civilisations and languages, the promotion of contacts among professional bodies, universities and cultural institutions; (c) the encouragement of technical, scientific and cultural exchanges.
ARTICLE 3 The Contracting Parties shall maintain the close relationship already existing between them in the field of trade and commerce. Representatives of the Contracting Parties shall meet from time to time to consider means by which such relations can be further developed and strengthened, including the possibility of concluding treaties or agreements on matters of mutual concern.
ARTICLE 4 This Treaty shall enter into force on today’s date and shall remain in force for a period of ten years. Unless twelve months before the expiry of the said period of ten years either Contracting Party shall have given notice to the other of its intention to terminate the Treaty, this Treaty shall remain in force thereafter until the expiry of twelve months from the date on which notice of such intention is given.
IN WITNESS WHEREOF the undersigned have signed this Treaty.
DONE in duplicate at Dubai the second day of December 1971AD, corresponding to the fifteenth day of Shawwal 1391H, in the English and Arabic languages, both texts being equally authoritative.
Signed
Geoffrey Arthur Sheikh Zayed
More on Quran memorisation:
Biography
Favourite book: Zen and the Art of Motorcycle Maintenance
Holiday choice: Anything Disney-related
Proudest achievement: Receiving a presidential award for foreign services.
Family: Wife and three children.
Like motto: You always get what you ask for, the universe listens.
