Akbank, one of Turkey’s largest private lenders, has sold $500mn worth of USD-denominated senior unsecured eurobonds abroad. They are due February 2026 at a fixed coupon rate of 6.80%, the lender said on June 30 in a stock exchange filing.
Turkey’s five-year credit default swaps (CDS), treated as a volatile trading instrument by the markets, stood just below 500bp as of July 1.
Citigroup Global Markets Limited (Citi), Emirates NBD Capital Limited (Emirates NBD), ICBC Standard Bank Plc (ICBC), Merrill Lynch International (BofA), SMBC Nikko Capital Markets Limited (SMBC Nikko) and Standard Chartered Bank (SCB) acted as book-builders in the issuance, to be completed on July 8.
The deal on Akbank’s e RegS/144A benchmark papers comes amid expectations that emerging market investors have finally opened up for corporate and financial institution issuance, Global Capital noted.
In January, it redeemed $500mn of 5-year eurobonds (US00972BAA70), which paid a 4% coupon.
The lender has $500mn of eurobonds due October 2022 (USM0375YAK49), which pay a 5% coupon.
It also has $500mn worth of 10-year eurobonds due October 2025 (US00971YAF79), which pay a 5.125% coupon.
Moody’s Investors Service sees Akbank at B3/Negative, six notches below investment grade, while Fitch Ratings has it at B+/Negative, four notches below investment grade.
Fitch Ratings rates Turkey at BB-/Stable, three notches below investment grade. Moody’s Rating Services rates Turkey at B1/Negative, four notches below investment grade, while Standard & Poor’s has the country at B+/Stable, also four notches below investment grade.
Earlier, in June, Belarus (Fitch/B/Stable, S&P/B/Stable, Moody’s/B3/Stable) placed $1.25bn of US dollar-denominated Eurobonds—a five-year tranche worth $500mn at 6.125% and a 10-year tranche amounting to $750mn at 6.375%.
In April and May, almost all countries in Eastern Europe sold eurobonds. Those that didn’t are preparing for auctions.
On June 20, Bloomberg quoted unnamed people with knowledge of the matter as saying that Turkey Wealth Fund (TVF) was considering a eurobond issuance later this year of at least $2bn and would soon choose around half-a-dozen banks to help arrange the deal. The wealth fund is rated three levels below junk by Fitch Ratings with a stable outlook. The sources were also reported as saying that TVF was working on getting a grading from a second international rating firm.
The fund’s apparent weighing up of a decision on a eurobond sale is taking place with central banks around the world pursuing stimuli that are spurring a global rally in junk bonds, Bloomberg noted.
In the last auction held by a Turkish issuer prior to Akbank’s latest issuance, the Turkish Treasury in February sold $2bn of 5-year eurobonds with a 4.25% coupon and $2bn of a 10-year paper at 5.45%.
On June 5, the Turkish Treasury redeemed $2bn worth of eurobonds. They were sold in two parts, in 2005 and 2007, and pay a 7% coupon.
On May 18, it redeemed €2bn worth of eurobonds sold in two parts in 2010. They paid a 5.125% coupon.
In May, it tapped €1.64bn via one-year euro-denominated bonds and lease certificates with a 1.25% semi-annual coupon and $1.35bn from one-year USD-denominated bonds and lease certificates with a 1.75% semi-annual coupon from local lenders.
In March, the Treasury tapped €1.26bn from local lenders in EUR-denominated paper with a 0.75% semi-annual coupon.
In what’s left of 2020, the Treasury has Japanese yen (JPY) 60bn of samurai bonds maturing in December.
According to the latest data, Turkey was obliged to refinance a total of $148bn in external debt, excluding obligations to foreign branches and affiliates, in the 12 months ahead as of end-April.
In May and June, there has been an acceleration in Turkish borrowers’ striking loan deals, while Akbank’s eurobond deal may open the way for other issuers, although the cost is high.
Turkish companies have obtained a total of €944mn worth of coronavirus (COVID-19) crisis financing from the European Bank for Reconstruction and Development (EBRD) so far, almost a quarter of the €4bn coronavirus package made available by the development bank.
The World Bank has also been active in providing coronavirus rescue financing to Turkey.