Source: Sayime BAŞÇI, Sozcu.com.tr
Corporations are experiencing great difficulties in debt payments due to the Covid-19 epidemic. Ernst & Young stated, that the companies that financially deteriorated will soon go bankrupt.
While the economic damages of the pandemic are increasing day by day, most companies in Turkey are fighting for their existence because of their debt burdens. Total credit to corporations rose by 38% YTD. Those firms which accrued high debts during the pandemic are struggling severely on loan payments, therefore a new bankruptcy wave is expected to hit soon in the upcoming period.
Ernst & Young Turkey President Metin Canoğulları states that bankruptcies will occur during this period considering that even the top-level management In Turkey does not know how to hedge the risks emanating from volatile exchange and interest rates.
Canoğulları said, “Indebtedness was already reaching a critical point for most companies before the pandemic. Considering Turkey’s Covid-19 outbreak is getting out of control and lockdowns are starting for a second time, zombie companies will be out of the picture soon, and that’s how it should be. Companies which can’t manage their operation and financial risks properly should be eliminated, for the sake of the competitiveness of markets.”
Stating that banks will be rolling their sleeves for debt restructurings, interest rate reductions and principal payment waivers Canoğulları added, “The limits of Turkish economy are obvious. Turkey is having trouble repaying its debts when the loan is in foreign exchange, therefore the economy has experienced a great distress in the past 10-15 years. Therefore, either banks or the state will cause zombie companies go bankrupt. It is just a matter of time.”
Translation Cem Cetinguc
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