Turk Telekom sells $500mn 6-year eurobonds at 6.875% coupon rate

Turk Telekom sells $500mn 6-year eurobonds at 6.875% coupon rate
Turkey’s largest telco Turk Telekom has sold $500mn worth of 6-year eurobonds at a coupon rate of 6.875% and a re-offer price of 99.396%
By bne IntelliNews February 22, 2019

Turkey’s largest telco Turk Telekom has sold $500mn worth of 6-year eurobonds at a coupon rate of 6.875% and a re-offer price of 99.396%, the company said on late February 21 in a bourse filing.

The issue capped an extraordinary week in the CEEMEA bond markets and Turk Telekom’s outstanding eurobonds rallied following the release of initial price guidance, such was the demand for exposure to the credit, Global Capital reported on February 21.

Earlier on February 21, initial price guidance on Turk Telekom’s 6-year Eurobond issue was announced at 7.375%, representing a 25bp new issue premium versus the outstanding notes at that time.

Reuters later reported that the initial price guidance for yield to investors was revised down to 7.125%-7.25% as the demand soared over $2bn.

The Turk Telekom share prices was down 0.19% d/d to TRY5.22 as of 15:00 local time on February 22 while the benchmark BIST-100 on the Istanbul stock exchange was up 0.76% to 103,273. The annual loss on Turk Telekom shares stood at 17% versus the 13% y/y gain on the BIST-100.

The BIST-100 was in the 87,000s on January 3 when the Turk Telekom share price was in the TRY3.50s.

On February 14, Turkey’s largest telco said that its high-level management would carry out investor meetings arranged by mandated lenders Bank of America Merrill Lynch, Citi, ING, MUFG and Societe Generale in London, Boston and New York, starting from February 15 to issue $500mn worth of eurobonds with maturities between 5 and 7 years.

Earlier this month, the Capital Markets Board’s (SPK’s) regular weekly bulletin showed that Turk Telekom had been given the green light to issue up to $500mn worth of eurobonds abroad.

On February 14, Standard & Poor’s said in a written statement that it had affirmed Turk Telekom at BB-/Stable. “We now expect a stronger Turkish lira against the U.S. dollar at 5.50 in 2019, compared with 6.90 in our previous base case,” the rating agency also said.

Fitch Ratings rate Turk Telekom at BB+/Negative.

In 2014, Turk Telekom issued $1bn worth of senior unsecured eurobonds in two equal $500mn tranches with maturities of 5 and 10 years, according to an investor presentation on its website. In 2015, the telco issued another $1bn worth of senior unsecured eurobonds in two equal $500mn tranches with maturities of 5 and 10 years.

On February 4, Turk Telekom said in a bourse filing that it has allocated $20mn to repurchase its bonds currently trading on the Irish Stock Exchange with the ISIN Code XS1028951264. According to the bourse filing, the company on February 1 bought bonds nominally-valued at $5mn at an average price of $93.125 for a total consideration of $4.69mn.

On February 6, it said it had bought another $5mn of nominally-valued bonds at an average price of $93.25 for a total consideration of $4.66mn. On February 7, it bought an additional $2.5mn of nominally-valued bonds at an average price of $93.625 for a total consideration of $2.34mn.

The largest M&A deal in Turkey in 2018 was the debt restructuring of Turk Telekom. The default of Ojer Telekom (Otas), the former major shareholder in Turk Telekom, is Turkey’s largest ever default.

Otas borrowed $4.75bn in 2013 to refinance its acquisition of a 55% stake in Turk Telekom. Akbank has $1.7bn worth of exposure to Otas’ loan while Garanti Bank contributed with $1bn and Is Bankasi with $500mn.

The 55% stake in Turk Telekom was taken over by a special purpose vehicle, Levent Yapilandirma Yonetimi (LYY), which is controlled by Akbank, Garanti Bank and Isbank.

Turkey’s Ministry of Treasury and Finance controls a 25% stake in Turk Telekom while the country’s sovereign wealth fund has a 6.68% stakeaccording to the Public Disclosure Platform (KAP).

The Turkish competition board said on October 12 in a written statement that it had launched an investigation into Turk Telekom regarding a claimed violation of competition legislation related to connection times and fees for wholesale leased line services.

Turk Telekom made a net profit of TRY2.22bn ($428.9mn) in Q4 versus a net loss of TRY113mn in the same period a year ago thanks to the bounce back of the Turkish lira, the company said on January 30 in a bourse filing.

Consequently, the company’s net loss amounted to TRY1.39bn in 2018 versus a net profit of TRY1.14bn in 2017.

The USD/TRY rate rose to 5.29 at end-2018 from 3.79 at end-2017 after weakening as far as the 7.20s, hitting an all-time worst rate, in August last year.

In the third quarter of 2018, Turk Telekom posted the highest ever quarterly loss of TRY2.85bn by a Borsa Istanbul listed company due to currency crisis.

Turk Telekom’s revenues rose by 13% y/y to TRY5.4bn in 2018 while consolidated Ebitda rose 31% y/y to TRY8.4bn. The company’s Ebitda target for 2018 was TRY8-8.2bn.

Turk Telekom is targeting 15-16% y/y of revenue growth in 2019 and an Ebitda of TRY10-10.2bn.

The company’s gross FX debts declined to $3.8bn in Q4 from $4.1bn in Q3 and $4.4bn in the last quarter of 2017, while its hedging ratio rose to 67% from 57% in Q3 and 35% in the last quarter of 2017.

Turk Telekom’s gross FX debts stood at $4.3bn in the first quarter of 2017, with a hedging ratio of just 13%.

 

 

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