Turkey

Denizbank is the latest Turkish issuer to turn to covered bonds. It has applied for permission to raise up to €300m in SME-backed bonds, which it intends to sell early next year.

The evolution of mortgage funding in the UK market has led to some convergence of RMBS and covered bonds as both markets compete in the three year floating rate space. With investors expected to favour secured instruments and issuers seeking innovative ways to address funding and rating challenges, the UK experience might prove to be a foretaste of things to come in Europe as a whole, The Cover argues.

Turkey’s Sekerbank confirmed that it has sold another tranche of its SME backed covered bond to UniCredit off the same shelf that was inaugurated last year. The placement follows the sale of two tranches to the European Reconstruction and Development Bank and European Investment Bank in December 2011, and comes ahead of an expected sale to another supra-national agency in the near future. The programme’s success has prompted at least three other Turkish banks to mandate UniCredit and set up similar programmes.

Commonwealth Bank of Australia looks set to become the first bank in the country to issue a covered bond in the home currency. The deal is also set to become the largest FIG bond ever sold in Australia.

The European Bank for Reconstruction and Development and European Investment Bank have bought the second of a three tranche SME backed covered bond from Turkey’s Sekerbank via sole lead arranger UniCredit.

Turkey’s Sekerbank on Tuesday partially closed on series one to three of its TL800m (€335m) covered bond programme. The transaction is the first covered bond out of Turkey and the first SME-backed covered bond globally.

Turkey’s Sekerbank is set to launch the first Turkish covered bond. Although it is backed by Turkish lira SME loans, the deal is nevertheless a genuine dual recourse instrument that is enshrined within the Turkish law. It is not only the first deal to be issued under the Capital Markets Board of Turkey law, but also the first secured deal to be backed by cashflows from existing local currency assets, rather than future receivables.

New euro benchmark covered bond supply appears on course to hit the market tomorrow (Tuesday) as issuers continue with preparations for deals despite a backdrop of uncertainty about whether or not a bail-out of Ireland will be set in motion.

With industry veterans saying that low ratings should be no obstacle to covered bond status and the rating agencies holding out the promise of piercing the sovereign ceiling, Turkish issuers were last Friday being bullish about their chances at the 11th Central European Covered Bond Conference, organised by the Banks Association of Turkey and the Association of German Pfandbrief Banks in Istanbul.

“Between two evils, I always pick the one I never tried before.” Mae West’s quote was invoked by Fritz Engelhard, director of European fixed income strategy at Barclays Capital, at the 11th Central European Covered Bond Conference in Istanbul yesterday (Thursday) to highlight the dilemma some issuers felt they were confronted by when choosing between structured and legislative covered bonds.

Delegates at the 11th Central European Covered Bond Conference, organised by the Banks Association of Turkey and the Association of German Pfandbrief Banks in Istanbul, yesterday (Thursday) debated the true cost of public supervision of covered bond issuance and, crucially, where deals from emerging markets should trade versus government bonds.

Turkey’s Capital Markets Board published the Bylaw on Principles Regarding İTMK (Turkish covered bonds) on 5 October, marking another regulatory step on the journey towards the first covered bond from the country.