Nedim Türkmen of Turkmen mentioned in Financial Times article

Turkish companies seek bankruptcy protection as slow down bites

Growing numbers have applied for the measure as they struggle to pay debts

Turkey is facing a mounting number of applications for bankruptcy protection as a slump in economic growth takes its toll on business. Requests for konkordato, a court-sanctioned agreement that allows struggling companies to try and avoid full bankruptcy by restructuring their debt payments, have soared in recent months. The surge follows a currency crisis over the summer that has triggered a sharp slowdown in the economy and piled pressure on Turkey’s indebted corporate sector. Turkey’s trade minster, Ruhsar Pekcan, said this month that the number of companies that had sought bankruptcy protection had reached 846, although many analysts believe that the true figure may be several times higher. Companies that have applied for the measure include well-known names from the retail, construction, manufacturing and energy sectors. The rising number of distressed companies prompted a warning from Tusiad, one of Turkey’s biggest business associations. “Every day, there is a new addition to the list of firms applying for bankruptcy protection,” Tuncay Ozilhan, president of the group’s high advisory council, told a recent Tusiad meeting. “If companies begin to go bankrupt, the situation will get worse. Small businesses, traders and the public will all be affected. Unemployment will rise . . . Lower demand will make life harder for companies. Banks will face greater balance sheet problems and their ability to extend credit will narrow further.” The government introduced konkordato (a term borrowed from the Italian concordato) in February to replace a previous form of bankruptcy protection. The process allows companies that have assets but are suffering from cash flow problems to draw up a schedule for paying their debts, often at reduced amounts and over a longer time span than originally agreed. It is overseen by trustees appointed by a commercial court. If the court approves the proposal, companies are granted an initial three-month period of protection, extendable for up to 24 months, that allows them to avoid declaring bankruptcy. The owner of one Istanbul-based company that supplies building materials to the construction sector told the Financial Times that the sharp fall in the lira, which has lost close to 30 per cent of its value against the dollar this year, had combined with a slump in construction to push his company to the brink of collapse. “We used up all our capital and we still couldn’t solve our problems,” said the businessman. “They were getting deeper and deeper.” Unable to pay his creditors or service the interest on bank loans worth millions of lira, he went to the courts last month to apply for konkordato. He has been forced to lay off close to 150 staff. The businessman, who asked not to be named for fear of harming his application, is confident that he can get his business back on track by selling off assets to pay the company’s debts. “If I didn’t believe we could do it, I wouldn’t have applied for konkordato,” he said. “I would have just declared bankruptcy.” Some companies and legal experts have voiced concern at the impact of protecting one troubled company has on the wider business ecosystem. “When a protection under konkordato is granted to a debtor, the insolvency that it experiences is amplified to its surroundings, as relatively smaller suppliers start suffering,” said Mehmet Gun, founder of Gun+ Partners, a law firm. Turkey’s banking system, though generally seen as robust, is also grappling with growing levels of non-performing or at-risk loans. An Istanbul-based producer of industrial air-conditioning units said that
rising konkordato applications and bankruptcies had put suppliers like him on edge. “I’m afraid of doing business,” he said, citing the fear that customers would take delivery of products and then fail to make their payments. “No one is giving anyone else long-term payment options.” Recommended The Big Read Turkish Airlines: flying the flag for Erdogan Others have voiced concerns about possible abuse of the measure by healthy companies. Those worries prompted the Turkish government last month to announce that it was tightening the rules. Some early applicants say that the system has worked for them. Cel-Mer, a producer of bespoke steel products based in the city of Kocaeli, sought konkordato in July. A court approved its plan to raise cash by renting out some of its warehouses to other companies. “We’ve starting paying our debts,” said Gazi Yilmaz, the company’s owner. “We won’t ask for an extension.” But others warn that, for some companies, the measure will provide only temporary respite. Some of the first businesses to be granted konkordato have begun to go bust. Fleetcorp, a car leasing company, declared bankruptcy in November, according to Turkish media reports. Citir Usta, a fast-food chain, joined its ranks this month. “If the economic situation gets worse, konkordato won’t be a solution,” said Nedim Turkmen, an accountant who writes a column for the opposition newspaper Sozcu. “It will end with bankruptcies.”

AL ARABIYA
Al Arabiya English, DubaiTuesday, 1 January 2019

Turkish firms turn to bankruptcy protection as economy slows down Turkey’s strained economy has left hundreds of companies on the verge of bankruptcy and forced to seek legal protection in the year 2018, Laura Pitel of the Financial Times reported. The Turkish trade minister, Ruhsar Pekcan, announced this month that a total of 846 companies had applied to Turkish courts for bankruptcy protection, a legal measure that allows them to restructure debts to avoid full bankruptcy. However, the real number, Pitel quoted analysts as saying, could be several times higher, according to Ahvalnews. This year has seen the Turkish lira plummet against the dollar by around 30 percent, at one point in the summer reaching crisis levels as tensions with the United States sent the lira down over 40 percent. Meanwhile, inflation peaking about 25 percent in the last quarter has also driven prices and interest rates up, leaving many companies struggling to survive. The new form of bankruptcy protection, called “konkordato” in Turkish, was introduced last February and has already been deemed necessary by a great deal of companies throughout the country, including some of its best-known companies. A company owner interviewed by Pitel described having to lay off 150 staff members and apply for bankruptcy protection after finding himself unable to service the interest on debts worth millions of lira. The owner believes that bankruptcy protection will grant him the time needed to sell off assets and pay his debts. “Otherwise I would have just declared bankruptcy,” he said. Others, however, see the widespread use of bankruptcy protection as no better than a stop-gap. “If the economic situation gets worse, konkordato won’t be a solution … It will end in bankruptcies,” Pitel quoted accountant and journalist Nedim Turkmen as saying