Middle East

They may be locked out of bond markets but Turkey’s financial institutions still have access to loan funding. But as this week showed, following the attempted coup in the country on July 15, the deals they strike are changing shape. Robert Cooke reports.

Yapi Kredi chose to cancel a deal before settlement last week, following the attempt coup in Turkey, and a four point drop in the bond's price. The decision was wise and investor friendly, but it's not a new precedent in emerging markets.

The surging rally in credit markets since the start of the month hit an impasse this week, as trader caution set in ahead of key policy decisions by the Bank of Japan on Friday and the Bank of England next week.

Turkish issuers have $2.5bn of public international bonds scheduled to mature before the end of this year but will have a tough time accessing bond markets aft the attempted coup of two weeks ago. But an EM syndicate banker said that most of those maturing bonds have already been refinanced.

Türkiye İş Bankası (Isbank) launched a loan on Friday, arranged by National Bank of Abu Dhabi and Standard Chartered.

Emirates NBD has printed a $500m 3.5 year Formosa private placement, marking a further opening of this market to Middle East issuers.

The loan market has closed at least two deals over the past week, mostly unperturbed by the upheaval in Turkey, although the price of refinancing will likely increase later in the year, bankers say.

An attempted coup in Turkey last Friday threw its borrowers into a maelstrom of pulled bonds, credit rating uncertainty, and the country itself into a three month state of emergency. Unlike their loan market counterparts, bond and money market investors have been wary of calling the bottom of the resulting sell-off, but the damage is contained as EM bond inflows enjoyed another record week, writes Francesca Young.

Last week’s failed Turkish coup, and the resulting crackdown, has spooked holders of Turkey’s dollar denominated government bonds.

MTN and CP investors have put Turkish bank deals on pause after the country's president declared a three month state of emergency on Wednesday, but the real test will come if the country is downgraded further by rating agencies, said MTN bankers.

Turkey's president, Recep Tayyip Erdogan, declared a three month state of emergency late on Wednesday only a few hours after Standard & Poor’s smacked the country with a downgrade.

Standard & Poor’s has downgraded Turkey’s foreign currency debt rating to BB from BB+, putting the country at the same level as Bahrain and Croatia — and two notches below South Africa.