Following the $7 billion debt swap that took place last Friday, Turkey held an additional swap in the amount of 850 trillion Turkish Liras ($733 million) on Monday, June 18. Although bids reached 1,639 trillion liras ($1.4 billion), only 850 trillion were met, reported AFP news agency.
The two deals allow Turkey to swap two-thirds of their lira-denominated bonds due to expire in June 2002, in exchange for three and five-year dollar-denominated bonds, carrying an interest rate of LIBOR (London Interbank Offer Rate) plus 2.85 percent. The exchange rate of the swap is to stand at 1,160,000 Turkish Liras to the dollar.
The last third of the Turkish denominated bonds is to be converted into one or two-year bonds (under the same currency), carrying an interst rate of 27.8 percent for the first six months, and a floating interest rate in the second six-month period, depending on the yield curves of bonds having maturity of longer than three months.
The swaps are expected to reduce the treasury's debt burden, have a favorable impact on public finances, as well as help banks cover foreign exchange positions. In addition to the cash crunch that took place in November, the financial turmoil that hit the country in February has led Turkish banks to encounter serious losses as a result of the 40 percent drop in the value of the Turkish currency relative to the dollar. In return for the multi-billion-dollar support of the IMF, Turkey has promised to implement rigid economic reforms. — (MENA Report)
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