Turkey

The Turkish economy slowed sharply this fall and looks set to contract this winter, presenting an immense political challenge for President Recep Tayyip Erdogan, who has overseen a debt-fueled boom that had made Turkey one of the world’s fastest-growing countries, The Wall Street Journal reported. Monday’s figures also present a conundrum for the country’s central bank, which defied Mr. Erdogan by sharply raising rates in September in an attempt to curb runaway inflation.

“Everybody has a bankruptcy story,” says Cem Sari, who’s just lived through his own version, in a year that turned into a national trauma. Turkey’s economy roared into 2018 with growth rates that were the envy of the world—and vulnerabilities that had been building over years, Bloomberg News reported. It was like a car that could still reach high speeds, so long as the driver ignored the multiple warning lights flashing on the dashboard. And then it crashed, suffering a classic run on its currency and a brutal credit crunch.

President Tayyip Erdogan’s AK Party on Tuesday submitted a bill to parliament to tighten Turkey’s bankruptcy law aimed at preventing what the government says is abuse of the regulation by some healthy companies, Reuters reported. A section of the current law is designed to give struggling firms temporary protection from creditors. Since going into effect eight months ago, it has seen a surge in applicants, officials and bankruptcy lawyers say, as a currency crisis has pushed the inflation rate to 25 percent and shaken the economy.

UniCredit SpA Chief Executive Officer Jean-Pierre Mustier’s turnaround plans hit a last-minute hurdle after the bank cut key targets and took a charge related to its Turkish bank, Bloomberg News reported. The lender surprised investors with an 850 million-euro ($972 million) charge to revalue Istanbul-based Yapi Kredi Bankasi AS and said it’s increasing funds to cover a potential settlement related to U.S. sanctions over Iran. The Milan-based bank also lowered targets for revenue and a key measure of financial strength this year and next, while keeping its 2019 profit target intact.

A leading Turkish carpet maker whose rugs adorn the floors of Istanbul’s luxury hotels and the region’s biggest mosque has filed for bankruptcy, Ahval reported. Avşar Halı was awarded bankruptcy protection by a court in Gaziantep in southeastern Turkey, the city where it is based, Sözcü newspaper reported on Wednesday. The firm has supplied carpets to five-star hotels in Istanbul such as the Ritz Carlton, Shangri-La Bosporus and the Hilton. Its rugs also furnish the floors of Çamlıca Mosque, the largest in Asia Minor, which opened in 2016.

A rescue plan drawn up by Turkey’s Ministry of Treasury and Finance would allow construction and real estate companies to offload unsold stock while channeling most proceeds toward repaying the country’s wobbly banks, Bloomberg News reported. Two associations of Turkish builders, known as Inder and Gyoder, have asked members to present an inventory of unsold real estate to a government-backed property investment trust Emlak Konut.

Turkey could use a so-called bad bank to provide relief to lenders hurt by the soaring number of bankruptcies and restructurings, according to a Houlihan Lokey executive, Bloomberg News reported. “It allows liquidity to flow back to the banks and allows banks to raise capital,” Joseph Julian, the advisory firm’s managing director and co-head of the Middle East, Turkey and Africa, said in an interview in Istanbul.

Turkey’s central bank is readying itself for a key policy meeting on Thursday that could disrupt the fragile stability of the country’s currency following months of turbulence, the Financial Times reported. While the Central Bank of the Republic of Turkey is expected to follow up September’s dramatic interest rate rise — when it hiked the benchmark lending rate by 6.25 percentage points to stem a developing lira crisis — by keeping rates on hold, the meeting is nonetheless a test of the bank’s credibility.

Turkish banking stocks are on course for their worst year in a decade -- and third-quarter earnings reports starting this week will show why, Bloomberg News reported. Spiraling inflation, a surge in interest rates and a plunge in the lira amid tensions with the U.S. are battering the economy. Companies and individuals are finding it harder to repay their loans, causing bad debts to swell and eating into earnings as lenders increase provisions and bolster capital buffers to brace for more defaults.

A group of lenders including the European Bank for Reconstruction and Development hired Lazard Ltd. to manage the restructuring of a $500 million loan for an Istanbul ferry company part-owned by Stagecoach Group Plc founder Brian Souter, Bloomberg News reported. The banks, including several local firms, gave the mandate to New York-based Lazard on Tuesday, according to Necmi Riza Bozanti, chairman of the company, Istanbul Deniz Otobusleri AS. He favors turning the debt into a lira-based liability, he said.