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14 | ifr special report | May 2010 FI LOANS


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lower price for the sake of the relation- ship,” said Berchtold.


Keeping its options open Isbank’s delay is also down to the bank exploring other options, mainly a lira denominated Eurobond. According to market sources, JPMorgan has been mandated to lead the transaction with an indicative size of TL 300m to TL700m (US$200m to $400m).


“The regulators were against banks issuing Eurobonds,” said one senior banker in Istanbul speaking off the record. “The regulators didn’t want banks to dilute their funding base, but now my sense is that they might have a softer view. The idea is sinking in more rapidly and the extra visibility this would give banks would be a major watershed.” Many local banks are approaching Credit Suisse for help in undertaking potential deals, said Bayar. One small local bank Sekerbank, founded in 1953 as the Sugar Beet Co-operative Bank, has mandated UniCredit to arrange a US$100m bond that will securitise SME loans. Prior to that, the only other Turkish bank that has been present in the Eurobond market is Bankpozitif, which in October 2009 sold a US$150m, five year Reg S deal at 428bps over mid swaps. At its base, the question of bond versus bank finance is the age old dichotomy between the stability of a bank deal versus the size of a bond deal. Moreover banks are thought likely to be more willing to refinance existing transactions than bond markets, where market risks around


Some cynics in Istanbul’s financial centre mutter that the regulator is not approving bank Eurobond deals because it wants to leave the field open to the sovereign, which is the only large Turkish entity to access these markets at present.


repayment time can be very difficult to navigate


The present roster of bank syndications suggests that there is ample liquidity within Western banks for these deals to roll over. Indeed all of them actually saw an increase in overall demand, an increase in eventual size and an increase in the individual commitments that each bank ended up making. And this is at a time when bank balance sheets are under con- siderable strain.


If there were to be a rash of international bank capital deals from Turkish banks, they would need to be considerably longer in size. They would also come from the


same investor base the government is looking to tap for its own Eurobond activities. Some cynics in Istanbul’s financial centre mutter that the regulator is not approving bank Eurobond deals because it wants to leave the field open to the sovereign, which is the only large Turkish entity to access these markets at present.


This argument seems somewhat fanciful. The sovereign has been hugely successful already this year, meeting its own funding target of US$5.5bn. The more likely source of concern is the currency. The whole current financial system is a result of a currency and banking crisis that roiled the country in 2001 and the regulations and regulatory attitude are entirely focused on preventing its recurrence. Hence the government is very wary of allowing banks to take on large foreign currency debts that are illiquid and difficult to refinance. They also would prefer that the banks maintain deposits as their main source of funding and not wholesale markets. The efficacy of this policy can be most obviously seen in the strength all the Turkish banks have shown through the present crisis. And the final irony is that with this strength, they are now perfect candidates to go to the bond markets. Nevertheless, Turkish bank syndications (even though they are actually club deals, everyone calls them syndications) will continue to be desirable to international investors, who are keen to get some Turkish exposure due to the lack of other sources. The bond market’s loss is the bank market’s gain.


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