ISTANBUL (Reuters) - Turkish food giant Yildiz Holding is to restructure $6.5 billion of its $8.5 billion in debt and the refinancing could be completed by the end of next week, two people familiar with the matter said on Wednesday.
Yildiz, which owns international food brands Godiva chocolate and McVitie’s biscuits, is offering almost all of its domestic real estate and some overseas assets as collateral, the sources said, declining to be identified because the information has not been made public.
The restructuring comes as investor concerns increase about Turkish corporate debt. Chronic weakness in the lira - the currency has lost more than 40 percent of its value against the dollar in a little more than three years and plumbed record lows in recent weeks - has driven up the cost of servicing foreign currency debt for Turkish firms.
“There is total debt of $8.5 billion, but a $6.5 billion portion of that will be refinanced,” one of the sources said, adding the refinanced debt will have a so-called “four plus four” maturity, for a total of eight years.
The refinancing ensures there will be a assessment of Yildiz’s financial situation at the end of the first four-year term, a second source said.
“At the end of the four years, there will be a financial test. Domestically, almost all real estate belonging to the company is being taken as collateral and very serious collateral is being taken from its companies abroad,” the second source said, adding the deal should be completed within a week or two.
Yildiz, which also owns Istanbul-listed biscuit maker Ulker (ULKER.IS), said in a statement: “As it is well known, pledging collateral is a common practice in the process for long-term loans and syndication agreements. The process regarding the issue is progressing normally.”
Turkish private sector long-term debt stood at $228 billion as of the end of February, according to central bank data.
Because one-third of Turkish bank loans are denominated in foreign currencies, problem loans will increase if the lira stays or surpasses its record low hit last week, ratings agency Moody’s said in a note to clients on Monday.
“The lira’s depreciation is credit negative because its prolonged weakness, combined with Turkey’s high domestic inflation, will likely increase problem loans,” it said.
Dogus Holding, a conglomerate whose holdings include the Nusr-Et steakhouses made famous by the “Salt Bae” chef on social media, is in talks with banks about restructuring some $5.8 billion in debt, Reuters reported this month.
The lira’s fall accelerated in recent weeks on widening concern about the central bank’s ability to contain double-digit inflation. President Tayyip Erdogan, a self-described “enemy of interest rates”, wants to see lower borrowing costs to encourage lending, new construction and economic growth.
(Removes extraneous word in Yildiz statement)
Additional reporting by Ali Kucukgocmen; Writing by Daren Butler and David Dolan; Editing by Dominic Evans and David Evans