Foreigners may snap up Turkish problem debt after new law - manager

Foreign asset management companies and banks are interested in purchasing some of the $47 billion in watch-list and non-performing loans (NPLs) held by Turkish banks, Reuters reported citing Sezin Ünlüdoğan, chief executive of Gelecek Varlık, Turkey’s largest purchaser of bad debt.

Ünlüdoğan said that a regulation introduced at the end of last year that opened up the market to outside investors and recent turmoil in Russia had spurred interest in the debt, Reuters reported on Wednesday.

Turkey’s bad debt problem went unaddressed for three years after efforts to place the loans under a special fund or asset management firm failed, Reuters said. Foreign investors were involved in those efforts but pulled out of talks when they could not agree with Turkish banks on matters including what constituted a bad loan.

The Capital Markets Board implemented the regulation that has paved the way for foreigners to invest in the loans, Ünlüdoğan said.

"A couple of deals and investments could be done this year," he said. "Furthermore, their interest may shift to Turkey from markets such as Russia where it is difficult to invest due to the sanctions.”

Turkish banks are saddled with 535 billion liras ($36.3 billion) of so-called "stage 2" loans, which are significantly in arrears, along with a further 160 billion liras of NPLs, Reuters said. Between 50 billion liras and 75 billion liras of the stage 2 loans are set to turn into NPLs this year, Ünlüdoğan said.

Official data shows that Turkey's NPL ratio fell to 3 percent at the end of February from 5.4 percent at the end of 2019. The decline was partly due to forbearance measures and a surge in the availability of cheap credit, Reuters said.

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