Three Turkish banks have applied to the Competition Authority (RK) to take over 55 percent stake of telecommunications giant Türk Telekom over the unpaid debts of their owner Saudi Oger.
The application for the takeover through a special-purpose entity/vehicle (SPV) was made public by the RK on its website on Thursday.
Creditor banks will extend a loan of up to $4 billion to the SPV they are creating to take over 55 percent of Turk Telekom as part of debt restructuring talks, two sources close to the matter told Reuters.
The majority stake will be used as collateral for the loan, according to the sources, who asked not to be named because the information is confidential.
"A $3 billion to $4 billion loan will be extended to this special purpose vehicle and banks will take the 55 percent stake as collateral," one of the sources said, adding that the plan is to complete the process in the third quarter.
Oger Telecommunications (Otaş), owned by Lebanon's Hariri family, had used a loan of $4.75 billion in 2013, showing 55 percent of its shares in Türk Telekom as guarantee. However, it failed to repay its installments.
The banks behind the move are Akbank, Garanti Bank and İş Bank, the three biggest private banks in the country.
Turkish broadcaster NTV reported that Otaş owes $1.7 billion to Akbank, $1 billion to Garanti Bank, and $500 million to İş Bank. French lender BNP Paribas and Deutsche Bank also extended loans to Otaş, it said.
Garanti Bank, İş Bank and Akbank reclassified Oger Telecom's debt as "closely watched" at the end of 2017.
Following the RK's announcement, Türk Telekom shares gained over 6 percent, amid an overall rise of 1.9 percent in the BIST-100 Index.
Moreover, with the communique published in the Official Gazette dated June 5 and amending the notification of share purchase offer, an annex was made to the 18th article entitled "Exemption from the obligation for share purchase offers."
According to the two paragraphs added to the article, in the case that the shares given to the bank as a collateral for the loan in case of non-repayment of the bank loans are, pursuant to the 47th article of the law, transferred to the ownership of the bank or to the special purpose business in which the bank is the founder, Capital Markets Board (SPK) may grant an exemption to the obligation to make a share purchase offer upon application.
Article 47 of the Capital Markets Law introduced an innovation in the pledge law and allowed loan contracts based on capital market instruments to be transferred to the creditor's ownership of pledged capital market instruments if the debtor defaulted. Before the arrangement, the creditor had to go to the executive sales.
Thanks to the arrangement, banks that gave taken Türk Telekom's shares as warranty by providing loans to Otaş, will now be able to own the said shares. They can even transfer it to a special purpose company by removing it from their balance sheets.
In addition to the 55 percent share owned by Oger, the Turkish Undersecretariat of Treasury has a 25 percent stake in Türk Telekom, while a 5 percent stake is owned by the country's Sovereign Wealth Fund and 15 percent is being traded in Borsa Istanbul.
Türk Telekom was established in 1995 after telecommunications operations were separated from Turkish Post (PTT), and privatized in 2005. In addition to operating land-based infrastructure, the company is the largest landline operator and internet service provider in the country. It is also the third-largest cellphone operator in Turkey.