Jumbo telcom loans come to Turkey

  • 19 Jun 2007
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It has been the tale of two telecommunications companies in the Turkish syndicated loan market this year. Banks have been more willing than ever to commit to multi-billion dollar financings with long tenors, such as the $3.8bn eight year loan for Ojer Telekomünikasyon. However, the cancellation of Turkcell’s loan has blotted an otherwise impressive copybook. Sarah White reports.

Telecommunications companies have been king in Turkey’s loan market this year, with bigger and longer transactions coming to market, despite the aborted facility for mobile phone operator Turkcell. But with traditional market drivers, namely financial institutions, not as keen to raise facilities in an election year as they have in the past, will 2007 really be the watershed year some had hoped for?

Ojer Telekomünikasyon’s return to market for a $3.8bn refinancing in February followed its successful $2.075bn venture last year, which raised over $3bn in commitments. But the new deal exceeded expectations when it was showered with over $7.5bn in commitments during the senior phase of syndication. An eight year facility, it was the longest tenor ever for a Turkish corporate loan, and a test of Western investors’ renewed appetite for large-scale lending opportunities in Turkey.

Margins were reverse flexed by 35bp over Libor, bringing pricing down to 240bp from 275bp on the deal, led by ABN Amro, BNP Paribas, Calyon, Citigroup and Fortis Bank.

Bankers attributed the loan’s success to the strength of the unrated Ojer — the company was set up in 2005 as a special purpose vehicle backing the purchase of a 55% stake in Türk Telekom by a consortium led by construction company Saudi Oger.

"If you look at why these deals have done so well, it’s because of the number of Turkish domestic banks who participate in them," says David Pepper, a syndicate manager at WestLB in London. "These banks have a great amount of liquidity which they can throw at deals of this size." The response to Ojer’s $3.8bn facility was guaranteed by the strong presence of Turkish banks but also drew support from other lenders, jumping at a chance to finance one of the transactions generated by Turkey’s privatisation programme.

Tasty telecoms

Telecoms group Avea also launched a $1.6bn loan in February, arranged by ABN Amro, which raised the whole amount of the loan in senior syndication.

Then in March Turkcell, Turkey’s biggest mobile phone operator, came to market seeking $3bn. The facility was led by Akbank, Citigroup, HSBC, Garanti Bank, JP Morgan and Standard Bank. Despite its being raised to finance acquisitions with fees payable only on utilisation, the deal attracted a lot of commitments in syndication. However the loan was cancelled at the end of May when Turkcell failed to acquire targets in the Middle East.

Referring to the fee structure, which resulted in banks receiving nothing when the facility was annulled, one banker close to the deal was surprised that this was not more of an issue in syndication.

"People wanted to be close to the name at pricing that looked decent," he said.

Despite Turkcell’s cancellation, bankers were confident that the response to the big transactions for companies expected this year would be enthusiastic.

"The deal for Avea set the tone and gave lenders more confidence. The landscape in Turkey is changing, more banks are looking at it as the new frontier," says Hasan Mustafa, a syndicate banker at ABN Amro in London. "This also has the effect of driving fees down."

Slow FI flow

With the corporate sector at the fore as a result of Turkey’s stop-and-go privatisation programme, steam has been taken out of lending to financial institutions, traditionally a strong market driver.

Garanti Bank matched its benchmark pricing set in 2006, with margins of 47.5bp on a Eu600m one year deal earlier this year. This record low was achieved when the bank came to market for Eu600m last year, but pricing on Turkish bank deals failed to drop any further after the stock market crash in 2006, and it has taken bank borrowers until now to drive margins back down again.

Despite developments in the financial institutions sector, when some tenors were pushed out beyond the standard single year the market was accustomed to, bank borrowers have failed to provide much business for foreign lenders this year.

"2006 was a great year for syndications in the banking sector, with close to $12bn raised," says Kudret Akgun, head of financial institutions at Garanti Bank in Istanbul. "Banks went for longer maturities, and the traditional one year tenor was replaced by two or three year tenors. This was a characteristic of last year partly because borrowers wanted to skip 2007, being a big year politically with elections on the agenda, and no one wants to be in the market."

Bank borrowing in Turkey has also been affected by the increase in foreign ownership of domestic banks, such as National Bank of Greece’s acquisition of a controlling stake in Finansbank in April and Dexia’s purchase of 75% of DenizBank in July. With Turkey’s mid-market financial institutions able to tap their parent banks for financing, there is less need to resort to the international loans market.

New sectors

With high hopes that Turkey’s privatisation programme will continue providing big corporate transactions, and that the deal flow will pick up after the general elections scheduled for July 22, bankers have also been looking at new opportunities which have previously been under-exploited.

"An area which has been of some importance in the last year and which will continue to develop is the energy sector, which is under-invested and is being liberalised," says Pepper.

Infrastructure deals are also tipped to spark a burst of activity, with the financing of the takeover and development of Port of Mersin underway and a deal for Port of Izmir scheduled.
Syndicated Lending in Turkey — 2007 YTD
Pos.BookrunnerDeal value ($m)No. of deals% share
1ABN Amro3,032421.3
2JP Morgan2,000214.0
7BNP Paribas84015.9
9Standard Bank50013.5
10Bayerische Landesbank13621.0
Source: Dealogic
  • 19 Jun 2007

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 24 Oct 2016
1 JPMorgan 317,793.98 1355 8.72%
2 Citi 301,114.13 1092 8.26%
3 Barclays 259,580.63 846 7.12%
4 Bank of America Merrill Lynch 258,842.43 934 7.10%
5 HSBC 224,273.23 905 6.15%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 25 Oct 2016
1 JPMorgan 32,854.00 58 6.73%
2 BNP Paribas 31,678.29 142 6.49%
3 UniCredit 31,604.22 138 6.47%
4 HSBC 25,798.87 114 5.29%
5 ING 21,769.65 121 4.46%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 25 Oct 2016
1 JPMorgan 14,633.71 80 10.23%
2 Goldman Sachs 11,731.14 63 8.20%
3 Morgan Stanley 9,435.23 48 6.60%
4 Bank of America Merrill Lynch 9,229.95 42 6.45%
5 UBS 8,781.68 42 6.14%