Hospital builders in Turkey agree to €1.1bn loan restructuring – sources
ISTANBUL (Reuters) – The two companies building the stalled Etlik mega hospital in Ankara agreed to one of Turkey’s biggest loan restructurings earlier this month, according to two sources, one of whom said the deal was worth 1.1 billion euros ($1.3 billion).
The European Bank for Reconstruction and Development, which has invested some 650 million euros in hospitals in Turkey’s major cities in recent years, has confirmed that it has signed the agreement which should allow construction of Etlik to resume.
Encouraged by a fall to record levels of the lira, the Italian Astaldi AST.MI and Turkey’s Turkerler struck the deal on Sept. 11 with 13 banks and financial firms, including three Turkish private lenders, the first source told Reuters.
Both sources had direct knowledge of the case and requested anonymity as they were not authorized to speak to the press. Astaldi and Turkerler did not immediately comment on the restructuring.
Etlik – which will have over 3,600 beds when complete – is one of the largest mega-hospitals funded under a public-private partnership (PPP) model. The construction boom has helped modernize healthcare and propel economic growth under President Tayyip Erdogan.
But the boom years faltered in 2018 when a currency crisis hit. Some of the PPP loans – mostly denominated in euros – have since put a strain on investors, leaving some projects halted and mired in cost overruns.
The Turkish lira has fallen 23% this year and has lost half its value since early 2018, paving the way for Etlik and other expected PPP restructurings, the sources said.
One of the sources told Reuters the deal with Etlik brought total funding to 1.1 billion euros from 900 million euros including new costs. The project, which began in 2013, was worth nearly 1.5 billion euros, said the person concerned.
This is one of the biggest restructurings in Turkey. The biggest was food giant Yildiz Holding’s $5.5 billion deal in 2018.
“Restructuring negotiations continue for other troubled PPPs,” the person said, adding that restructuring agreements are expected soon.
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Under the PPP model, Ankara guarantees a certain amount of revenue to construction companies for a specified period. But loans, which totaled some $10 billion for 17 hospital projects, were often denominated in euros while rents were pegged to euros but denominated in lira.
Turkey’s finance ministry declined to comment on Etlik’s restructuring. A government website says construction is 60% complete.
A Turkish official who requested anonymity said Etlik’s issue was resolved but “a method is needed so that similar issues do not occur.”
Earlier this year, before the coronavirus pandemic halted an economic recovery, Ankara took legislative steps to protect itself and investors from rising costs.
($1 = 0.8597 euros)
Additional reporting by Birsen Altayli, Orhan Coskun and Ali Kucukgocmen; Editing by Daren Butler and Emelia Sithole-Matarise