Turkey’s 79% Inflation Drives Company Debt Into Distressed Zone

Some of Turkey’s biggest companies are seeing their bonds enter distressed territory, as soaring inflation and one of the world’s worst-performing currencies wreak havoc on the economy.

Two bonds of the nation’s second-largest telecoms firm, Turk Telekomunikasyon AS, have traded at distressed levels since the start of last week. Investors are demanding a premium of more than 1,000 basis points over US Treasuries for the firm’s June 2024 and February 2025 notes, worth a combined $1 billion, according to Bloomberg-compiled data. In response to Bloomberg questions, the company said its liquidity position was “sound” and that it may consider repurchasing any of its two dollar bonds, depending on liquidity conditions.

Turkish firms face more than $16 billion of debt coming due by the end of 2024. With corporate yields on dollar debt on average almost at 12%, refinancing pressures are being compounded by a weak lira. The currency has lost more than a quarter of its value against the dollar this year, putting strain on companies that generate most — and in some cases all — of their revenue in Turkey, but have dollar-denominated debt.

Turkey has this year seen only one sale in international debt markets after Coca Cola Co.’s bottler unit sold bonds in January. That compares to 14 corporate deals for all of 2021, according to data compiled by Bloomberg.