DUBAI: Lenders including Deutsche Bank, HSBC and China Development Bank are resisting calls by Saudi Telecom (STC) to restructure a loan that could potentially leave them with losses of up to $600 million, banking and industry sources said.
The tussle over the $1.2bn loan highlights the risks banks face extending loans to state-owned firms in the Middle East, where billions of dollars of debt had to be renegotiated in the wake of the 2008 financial crisis. It also shows banks, facing tougher capital rules, are less willing to accept losses.
STC backed the Islamic loan for Axis Telekom, its Indonesian arm, in 2011. But Axis’ performance has deteriorated and the company is now in breach of some of the loan’s terms, four sources aware of the matter said.
STC, which owns 84 percent of Axis, has asked banks to restructure the debt to reflect its true value of between $600-$800m. The lenders, led by Deutsche Bank , have refused, and are considering alternatives to recover their money, the sources added.
“On the one hand, you have a big exposure that you cannot let go and on the other side, you have to be careful of your business relationships in the kingdom,” one Dubai-based banker said.
The deadlock is complicating STC’s plan to sell Axis Telekom to its rival, PT XL Axiata .
STC needs the consent of the creditor banks before it can sell the business. STC in an emailed statement confirmed it was in talks to sell Axis as its financial performance has been poor. HSBC and Deutsche Bank declined to comment, as did XL Axiata CEO Hasnul Suhaimi.
Reuters
