The 2005 privatization of Turkish telecommunication company Turk Telekom, the largest in Turkey’s history, may go to waste as the majority stakeholders are struggling to repay loans.

Turk Telekom, the main actor in Turkey’s telecommunication sector and the biggest sell-off in its privatization history, is in deep trouble and may end up back in government hands. The giant company was privatized in 2005, as Ojer Telekomunikasyon A.S. (Otas) — a subsidiary of Oger Telecom, owned by the Lebanese Hariri family — acquired a controlling 55% stake. The turbulence jolting the company stems from Otas’ failure to repay loans in what is described as Turkey’s biggest ever default.

The 60-day deadline the Turkish Treasury set for Otas to repay its $4.75 billion bank loan expired Oct. 1 amid reports that the treasury was mulling temporary changes in Turk Telekom’s executive board. The reports were based on remarks that Transport, Maritime Affairs and Communications Minister Ahmet Arslan made Sept. 20. Arslan said, “Ownership may change hands in [Turk Telekom]. The treasury or we, as representatives of the treasury, will do what is required under the contract.” The minister added, “We cannot allow the erosion of a pre-eminent establishment.” The minister stressed how “issues stemming from Turk Telekom’s shareholders are not issues that affect Turk Telekom’s operations and development.”

According to Turkey’s Information and Communication Technologies Authority, Turk Telekom had net profits of $2.5 billion in 2014 and $1.3 billion in both 2015 and 2016. Drawing on those figures, the government maintains that the problem is not with Turk Telekom itself, but the majority stakeholder’s failure to repay debts.

Turk Telekom represents the largest single sell-off in Turkey’s privatization history, accounting for more than $6.5 billion in total privatization revenues of nearly $72 billion. In the auction held July 1, 2005, the Oger Telecom Joint Venture Group made the highest bid of $6.55 billion, beating narrowly a $6.5 billion bid by the Etisalat-Calik Joint Venture Group. Calik Holding, which is very close to the government, had Berat Albayrak — President Recep Tayyip Erdogan’s son-in-law and currently energy minister — among its senior executives at the time.

While Oger Telecom holds the majority 55% stake in Turk Telekom, the Turkish Treasury owns a 25% stake, including a “golden share.” Turkey Wealth Fund holds a 5% stake, and 15% of the company’s shares are publicly traded.

Otas’ repayment troubles pertain to loans it took ın 2013. Following the auction, Otas had said it would pay 20% of the tender price in cash and the remaining sum in five equal installments. In 2007, however, it took a $4.3 billion loan and closed its debt to Turkey’s privatization authority early. Then, in 2013, it moved to refinance its 2007 loans through fresh loans of $4.48 billion and 211.97 million euros from a consortium of banks. In a statement on the Public Disclosure Platform, Turk Telekom said BNP Paribas Fortis, Citi, Deutsche Bank, JP Morgan and Turkish banks Akbank and Garanti were the “mandated lead arrangers” in the credit deal, which allowed banks to seize Otas shares in Turk Telekom in return for unpaid debt.

The Turkish lira’s depreciation against the dollar has added to Otas’ repayment woes. With the greenback climbing back to being worth more than 3.6 liras this week, few expect the company’s troubles to alleviate.

After the Treasury’s deadline expired in the wake of several reprimand letters to the company in previous months, all eyes are on the government. Under the contract signed with Otas, the Treasury has the right to make changes in Turk Telekom’s executive board if the company runs into trouble after privatization. Will the government use its right to replace seven board members?

Otas scrambled for a solution before the Oct. 1 deadline, but failed to reach a deal with the banks. Saudi Telecom, which owns a 35% stake in Otas, has reportedly offered to inject cash by buying more shares in Otas, but the offer has not materialized yet. Reutersreports that Oger Telecom missed its third payment in September, after missing two payments of $290 million each in March and September 2016.

According to Enver Erkan, a research expert at Kapital FX, Turk Telekom’s nine-month balance sheet indicates that the company has 3.15 billion liras in cash and cash equivalents, and a net debt of 10.45 billion liras. Erkan said, “Its current assets, meanwhile, are 9.2 billion liras, meaning that the debt cannot be rolled over with the current assets.”

Market speculation indicates that the creditors are in favor of the Treasury stepping in, which, they believe, would boost their prospect of reimbursement. Similarly, a Treasury intervention is expected to open the door to the restructuring of the loan. The banking sector is burdened also with the $1.6 billion loan that the publicly owned Ziraat Bank issued to Cukurova Holding in 2014 for Turkcell, Turkey’s leading mobile operator. This, too, has added to expectations for a strong government intervention. Alternatively, should a loan of such a size become nonperforming, the banks would be legally obliged to set aside provisions, which would have a negative impact on the Turkish banking sector’s performance and outlook.

Last week, the issue reached parliament, where a deputy from the main opposition party filed a motion calling for a parliamentary inquiry into Turk Telekom.

In the meantime, Saudi Telecom asked for an extension of the payment deadline as it continued talks with creditors on restructuring Oger’s debt. According to media reports, Saudi Telecom wrote to the treasury, asking for extra time until November. Along with the treasury, the prime minister’s office and the Transport Ministry were expected to evaluate the request.

It seems the turbulence at Turk Telekom will continue for some more time. How much damage it will inflict is hard to predict. The government sees the problem as a shareholder’s problem, but the banks are looking to the government for a solution. The return of privatized shares to public ownership is highly possible, which would mean a return to ground zero in the company’s privatization process.

Written by Mustafa Sönmez