Turkey’s jittery financial markets—on the lookout for any signs of turbulence from the coronavirus (COVID-19) crisis placing unbearable additional strain on the country’s already exposed economy—on
The costs were identical to those of the benchmark set by
The costs compare lower to costs arranged in March 2019 (Libor+2.50% and Euribor+2.40%) while it is only the euro costs that are slightly lower held up against an
Eximbank needs to renew a
In May,
“Problems on the liabilities side of banks’ balance sheets are most likely to occur in
Those EMs with more indebted private sectors that also have a large share of private sector debts in forex were more exposed, he added.
“In Turkey’s case, risks are altogether greater. Banks have financed lending through large short-term external debts. And banks look weaker than they were going into the currency crisis in 2018. In a best-case scenario, a severe credit crunch will follow. And in a worst-case scenario, a wave of bank defaults is likely to ensue,” Glossop added.
‘Selective Default’ on Vestel Elektronik
The downgrade from Standard & Poor’s was applied to TV and household appliances maker Vestel Elektronik. It took the company to ‘Selective Default’ (SD) from ‘CCC+’ with the rating agency responding to Vestel Elektronik postponing a portion of its financial obligation due in
Despite the lending counterparties agreeing to the postponement, S&P considered the exchange to be distressed.
In S&P’s view Vestel Elektronik's tight liquidity and weak credit metrics, with its forecast liquidity sources over uses of less than 0.4x (over the next 12 months as of
In addition, S&P saw Vestel Elektronik's refinancing ability as further constrained by its relatively high share of foreign currency-denominated debt of around 40%, and expected demand and supply disruptions caused by the COVID-19 stress.
Although the Turkish government is representing Turkey’s current account deficit as under control—thanks to its habitual employment of a change in methodology—the pointedly ignored capital account continued to give off bad signals in February prior to the “COVID-19 sudden stop” in March.
The capital account was at
“Major outflows”
“Apart from those [items], the overall capital account actually witnessed major outflows,” Seker Invest said on
Despite relatively limited redemptions in February, both the banking and corporate sectors attained low rollover ratios in new borrowing at 69% and 65%, leading to a total
There was also a
The banks have remained net debt payers in each month since
Non-residents sold
At the same time, net FDI inflows stood at a mere
“There is clear evidence that
“A few quick points are worth making. First, turning to the Fund would be a huge loss of face for President [
“I do not see capital controls… So options are: A) SWAP lines with the Fed… but… it has wanted some assurance of [monetary and exchange rate] policy orthodoxy… Turkey… simply does not tick the boxes there. So the Fed would need to be dragged kicking and screaming and by some huge geopolitical ask from Erdogan to Trump, or rather ‘give’ from Erdogan to Trump. Read there S400 backdown [on bringing acquired Russian missile defence systems into operation], purchase of [US] Patriots [missile hardware],”
“But in the end the US likely would prefer
“De facto no swaps”
In regard to capital controls, Erdogan just cut banks’ offshore swap limits to 1% of equity, so make that "de facto no swaps", while on
He has introduced many limitations on FX trade since March last year, but he's not managed to convince some of his allies that he's achieving capital controls.
Erdogan still has about
“Just in case anyone is in any doubt: I'm bearish Turkey,”
Major external financing obtained by Turkish borrowers | ||||||||
Total | Renewal | Maturity | Tranche | Cost | Tranche | Cost | ||
(mn) | Rate | (days) | 1 | 1 | 2 | 2 | ||
Apr-20 | Ziraat | 77% | 367 | Libor+%2.25 | €597 | Euribor+%2.00 | ||
Apr-20 | Vakifbank | 130% | 3-year | ICBC | ||||
Apr-20 | 86% | 367 | Libor+2.25% | €316 | Euribor+2.00% | |||
Apr-20 | Ulker | 121% | 3-year | €244 | €75 | |||
Mar-20 | Turkcell | €50 | 5-year | Euribor+1.95% | ||||
Jan-20 | Borusan EnBW | EBRD | ||||||
Jan-20 | Getir | Moritz | Crankstart |
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