Turkey Readies Lifeline for Builders That Will Also Please Banks - EcoFinBiz Blog

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Turkey Readies Lifeline for Builders That Will Also Please Banks

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(Bloomberg) -- A rescue plan drawn up by Turkey’s Ministry of Treasury and Finance would allow construction and real estate companies to offload unsold stock to a state-backed fund and channel most proceeds toward repaying the country’s wobbly banks.

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.

Key Insights

  • Should the government go ahead with the plan as outlined in a document sent to builders by the two associations, companies will apply for the state-backed fund to buy their unsold units at a discount to market prices, with 70 percent of the proceeds going to their creditors. That’s likely to be a boon to lenders, which have had to contend with a wave of demands for debt restructuring from companies following the lira’s slump.
  • Priority will be given to companies already struggling to service bank debt, in a sign that policy makers are showing as much concern for lenders as for construction firms.
  • The Ministry of Treasury and Finance is taking the lead in planning and putting together the necessary funds. Any sign of increased government spending would heighten investor worries that Turkey may not be ready to deliver the fiscal tightening it’s been promising after a bout of financial turmoil that began in August.
  • The ministry and Turkey’s banking association, which is providing assistance to policy makers alongside Emlak Konut, couldn’t be reached for comment on the plan.
  • Emlak Konut said in a public filing that it was making an inventory of finished real estate units and called media reports about its work untrue, without elaborating.

Market Reaction

  • The Borsa Istanbul banking index pared losses after the report of the plan on Tuesday. It was down almost 2 percent at the close in Istanbul, faring worse than the country’s benchmark stock gauge.

--With assistance from Firat Kozok and Onur Ant.

To contact the reporters on this story: Kerim Karakaya in Istanbul at kkarakaya2@bloomberg.net;Asli Kandemir in Istanbul at akandemir@bloomberg.net

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, Paul Abelsky, Amy Teibel

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