Turkey

The Middle East is continuing its domination of the CEEMEA primary market and even the Latin America new issue market is starting to see some action as a run of successful bonds in the last fortnight is helping to bolster investor confidence.

It is the 10th anniversary of Lehman’s collapse and we are being inundated with retrospectives and predictions of what will cause the next crisis. Many are pointing towards emerging markets as a likely catalyst, a logical conjecture given the tightening in monetary policy that is underway in the US.

The Central Bank of Turkey delivered a larger-than-expected interest rate hike this week that was given a cautious welcome by emerging markets bond syndicate bankers hoping to see some stability in the lira. Loans bankers working on a crucial $930m loan refinancing for Akbank — seen as a litmus test of foreign lenders' appetite to roll over loans to the financial sector — were nonplussed by the move, but still expressed confidence in rolling the bulk of the funds.

The Turkish central bank, in a remarkable display of independence, has raised its weekly repo rate by 625bp, combatting its runaway inflation but making recession a more likely prospect, according to one investor.

Akbank has been defiant in the face of claims from pockets of the loan market that its latest deal will not gain enough traction to fully refinance the loan it is replacing, claiming that a 100% rollover is still a possibility.

Investors’ eyes are on the Middle East this week as a slew of borrowers bring Sukuk trades to market, but while hopes are high for successful deals, a Turkish central bank rate decision looms large in investors’ minds.

Most rated Turkish corporates can handle their refinancing needs over the next 12-18 months, according to Moody’s. This is despite anecdotal evidence from bankers about deteriorating loan metrics in the country.

Akbank’s revised lender-friendly terms on its syndicated loan looks like it will be enough to secure a decent deal, though some bankers considering the trade say the issue runs far deeper than risk adjusted pricing.

Emerging market borrowers and investors are returning from the summer break slowly but surely this week, but caution is still the prevailing tone.

Lenders working on Turkish bank syndicated loans say deals are still going ahead, and any suggestion that the country’s woes have postponed the active deals are just rumours.

Panic has gripped Turkey's markets, sending investors scuttling. Luckily, the loan market has proved once again that it is capable of providing much needed cool heads amid the sea of red on screens this summer.

It’s been a turbulent summer in emerging markets, but borrowers in the Middle East in particular are already eyeing their return to the market.