Make no mistake, Turkiye Finans had a good result with its sukuk, the first by a Turkish bank this year, and the first after the country’s recent political troubles. The Turkish participation bank got the $500m it wanted and priced the five year deal at 5.375% - a level that investors said was decent.
The notes also traded up from par on the break to 100.125 / 100.375, suggesting Turkiye Finans left just enough on the table to ensure a strong secondary market showing.
But the orderbook looked very different to other sukuk this year. The deal was three times covered, so clearly there was robust demand, but this is well short of the five to 10 times levels of oversubscription seen for other deals this year such as Mexim Bank, Dubai Investments Park, Saudi Electricity Co and Damac.
Early orders for Turkiye Finans announced on Tuesday at $750m were described as “sluggish” by some market participants. Reasons for this ranged from the Turkish economy, the performance of the Turkish sovereign’s 2012 sukuk issue and the possibility that Turkiye Finans might be seen as a niche credit.
But the smaller book might just be a book with more realistic orders in, and for that it can thank Damac.
At the start of the month, Damac’s priced its debut at just 310bp over mid-swaps – much tighter than its mid-300bp guidance – and increased the size of the deal from $500m to $650m. Pushing on price and size meant the $2.7bn book failed to translate into secondary demand, the Damac notes tanked and two weeks later are still two points below par, despite a general rally in sukuk credits last week.
Damac prompted investors to warn that the next sukuk might see people think twice before putting in big orders.
Enter Turkiye Finans.
With Damac in mind, the doubling of Turkiye Finans’ order book from Tuesday morning to final pricing can be seen as a strong endorsement of the level at which it chose to launch, instead of a poor result compared to five or 10 times subscription.
While Damac's aggression has left some investors feeling two points sore, it looks to have curbed the previous rampant enthusiasm to place overblown orders for sukuk. That, in itself, is no bad result.