Turkey

The global rise in dollar funding, combined with political upheaval and the heavy depreciation of the lira are destroying some of the historically borrower-friendly terms available in the Turkish loan market. Elly Whittaker reports.

Turkish participation bank Turkiye Finans (TFKB) has agreed a $180m Islamic club loan with similar pricing to its loans in recent years, despite sector-wide downgrades for Turkish banks after a turbulent year in the country in 2016.

It’s that time of year when analysts dust off their crystal balls and make predictions for the next 12 months. In December 2015 not many were forecasting that Britain would vote to leave the EU, and even fewer were betting on a Donald Trump presidential victory, so investors would be wise to treat such missives with caution. Political risk is a capricious beast, even for the most seasoned market observers.

Turkey’s Elazig Hospital has placed an innovative project bond, the structure of which enabled it to achieve a rating two notches above the Turkish sovereign. With infrastructure financing needs huge in the emerging markets, the deal sets a strong precedent for future issuance.

In this round-up, China saw another sizeable drop to its foreign exchange reserves in November, the Shenzhen Connect saw subdued trading activity in its first four days, and Egypt signed its first currency swap line with China. Plus, a recap of our coverage this week.

The latest loan refinancings for Garanti and QNB Finansbank were trading at a higher level than previous newly issued Turkish bank loans this week, showing how concerns about the weakening lira have driven up pricing. Meanwhile smaller syndicates for Turkish bank loans will be the new normal, according to Garanti's head of financial institutions.

Garanti saw the syndicate for its latest one year loan shrink by five lenders. Other Turkish banks will have to take note as smaller lending groups are set to become a feature of their borrowing, according to the head of financial institutions at the bank.

Since Qatar National Bank completed its acquisition of Turkey’s Finansbank this year, the acquired bank has been able to hold pricing on its annual syndicated loan steady — but most of its country’s other banks are paying more for deals this year, as lenders’ dollar funding costs have risen and the threat of downgrades hangs over Turkey.

The most recent loan refinancings for Turkish banks Garanti and QNB Finansbank were seen trading at a higher level than previous newly issued Turkish bank loans, showing how concerns for the weakening lira has driven up pricing.

Turkey’s QNB Finansbank and Garanti plan to sign their second yearly loan refinancings this week, according to bankers, marking the end of a tumultuous year for Turkish bank loans.

Turk Telekom subsidiary Avea has signed a €90m nine year loan backed by Finnish export credit agency Finnvera, after Avea's ultimate parent company Otas failed to make a repayment on a $4.75bn loan in September.

The Republic of Turkey plans to raise $6bn in the international markets next year using a combination of SEC registered dollar bonds, as well as other instruments, according to debt bankers.