ISTANBUL, Sept 29 (Reuters) - The two companies building the stalled Etlik mega hospital in Ankara agreed to one of Turkey’s largest loan restructurings earlier this month, according to two sources, one of whom said the deal was was worth 1.1 billion euros ($1.3 billion).
The European Bank for Reconstruction and Development, which has invested some 650 million euros in big city hospitals in Turkey in recent years, confirmed it signed off on the deal that should allow construction of Etlik to resume.
Prompted by a fall to record lows in the lira currency, Italy’s Astaldi and Turkey’s Turkerler reached the deal on Sept. 11 with 13 banks and finance companies, including three private Turkish lenders, the first source told Reuters.
The two sources had direct knowledge of the matter and requested anonymity because they were not authorised to speak to the press. Astaldi and Turkerler did not immediately comment on the restructuring.
Etlik - to have more than 3,600 beds when complete - is among the largest of mega hospitals funded under a public-private partnership (PPP) model. The building boom helped modernise 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 badly strained investors, leaving some projects halted and mired in cost overruns.
Turkey’s lira has fallen 23% this year and has shed half its value since early 2018, clearing the way to Etlik and other expected PPP restructurings, the sources said.
One of the sources told Reuters the Etlik deal raised the total financing 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, the person said.
It is among Turkey’s largest restructurings. The biggest was food giant Yildiz Holding’s $5.5 billion deal in 2018.
“Restructuring negotiations are continuing for other PPPs that are in trouble,” the person said, adding restructuring deals are expected soon.
MORE DEALS TO COME
Under the PPP model, Ankara guarantees a certain amount of income for the construction companies for a set period. But the loans, which totalled some $10 billion for 17 hospital projects, were often denominated in euros while lease payments were indexed to euros but denominated in lira.
Turkey’s finance ministry declined to comment on the restructuring of Etlik. A government website says construction is 60% complete.
A Turkish official who declined to be named said the Etlik problem is solved but “a method is needed so similar problems don’t happen”.
Early this year, before the coronavirus pandemic halted an economic recovery, Ankara took legislative steps to protect itself and investors from increasing costs. ($1 = 0.8597 euros)
Additional reporting by Birsen Altayli, Orhan Coskun and Ali Kucukgocmen; Editing by Daren Butler and Emelia Sithole-Matarise