Akbank launches Turkey's autumn syndicated loan renewals season for peers at record high costs

Akbank launches Turkey's autumn syndicated loan renewals season for peers at record high costs
/ bne IntelliNews
By Akin Nazli in Belgrade October 26, 2022

Akbank (AKBNK), the big-cap unit of Turkish conglomerate Sabanci Holding (SAHOL), has obtained a 367-day syndicated loan in two tranches of $225mn and €178mn, the lender said on October 26.

Story chart: Rollover Ratio of Syndicated Loans and Cost of Syndicated loans.

The cost of the USD-tranche stood at the guaranteed overnight financing rate (SOFR) plus 425bp. The cost of the EUR-tranche was the euro interbank offered rate (Euribor) plus 400bp.

The exchange rate-adjusted renewal rate was very low, standing at 60%, while spreads marked record high levels.

Benchmarks are achingly high at the moment as SOFR surpassed the 3%-level, compared to the 0.05% seen in October 2021, while 12-month Euribor is hovering in the 2.70%s, compared to the minus 0.5% recorded in October 2021.

Recently, all the benchmarks have been on the rise in parallel with the global monetary tightening trend.

In October 2021, Akbank obtained a 367-day syndicated loan in two tranches of $460mn and €207mn. The cost of the USD-tranche was lower by 35bp at Libor+2.15% and the cost of the EUR-tranche was lower by 50bp at Libor+1.75% compared to the Libor+2.50% and Euribor+2.25% seen in October 2020 (see full list below).

In June 2023, SOFR is to replace the current USD-benchmark London Interbank Offered Rate (Libor). One-year Libor currently stands at over 5%.

Turkish banks conduct 367-day—a ‘trick’ maturity for registering loans as long-term by using two extra days—syndicated loan renewal seasons twice a year, with one season in spring (April-May) and the other in the autumn (October-November).

Across recent years, Akbank (AKBNK) has set the Turkey benchmark for the interest rates each season.

In April this year, government-run Ziraat Bank launched the spring season. In July, Industrial Development Bank of Turkey (TSKB) concluded the spring season.

The spring season lasted from April to July. Eleven banks renewed $8bn worth of loans at a combined renewal rate of 92% with borrowing at $7bn in total.

The costs of the USD-tranches stood at the guaranteed overnight financing rate (SOFR) plus 275bp. The costs of the EUR-tranche were Euribor+210bp. In spring 2021, the costs stood at Libor + 2.50% and Euribor + 2.25%.

In the just-launched autumn season, nine Turkish banks will roll over a combined sum of $6bn. In the autumn season of 2021, nine Turkish banks renewed around $6bn worth of syndicated loan facilities at a combined renewal rate of 102%.

In August this year, rumours in Turkey suggested that local banks did not want to roll over their FX debt at current costs while the government was pressuring them to at least secure an 80% renewal rate.

Akbank launched the season at a very low renewal rate. If Akbank's peers follow its path, it will mean around $2-3bn worth of capital outflows. It would not be a big deal for Turkey. Government-run banks might go for higher renewal rates.

As things stand, Turkey does not have big hopes when it comes to attracting financing from the financial industry. As a result, unfavourable loan renewals come as no real surprise. The government has been chasing up FX inflows from “friendly” countries, while the unidentified capital flows channel has lately been working overtime.

Given the situation as regards the widely doubted reliability of Turkey’s official macro data releases, syndicated loan renewals are a good indicator in following developments in the sustainability of Turkey’s external debt burden. Akbank has not provided a good signal, although a systemic default is still not seen on the cards.

Table: Full list of Turkish banks’ syndicated loan renewals.

    Total Renewal Maturity Tranche Cost Tranche Cost
    (mn) Rate (days) 1 1 2 2
Oct-22 Akbank (AKBNK) $403 60% 367-day $225 SOFR+4.25% €178 Euribor+4.00%
Jul-22 TSKB (TSKB) $109 63% 367-day $18   €90  
Jun-22 ING Turkey €300 100% 367-day   SOFR+2.75%   Euribor+2.10%
Jun-22 Isbank (ISCTR) $774 88% 367-day $257 SOFR+2.75% €483 Euribor+2.10%
Jun-22 Denizbank $453 120% 367-day $196 €204 364-day Chinese yuan 255mn
May-22 Garanti BBVA (GARAN) $594 100% 367-day $284 SOFR+2.75% €291 Euribor+2.10%
May-22 Yapi Kredi (YKBNK) $811 91% 367-day $350 SOFR+2.75% €432 Euribor+2.10%
May-22 Turk Eximbank $745 104% 1-year $206   €504  
May-22 QNB Finansbank (QNBFB) $364 118% 367-day $137 SOFR+2.75% €212 Euribor+2.10%
May-22 Vakifbank (VAKBN) $983 101% 367-day $200 SOFR+2.75% €739 Euribor+2.10%
Apr-22 Akbank (AKBNK) $701 108% 367-day $343 SOFR+2.75% €329 Euribor+2.10%
Apr-22 Ziraat Bank $1,240 100% 367-day $353 SOFR+2.75% €814 Euribor+2.10%
Nov-21 Vakifbank (VAKBN) $650 102% 367-day $296 Libor+2.15% €314 Euribor+1.75%
Nov-21 QNB Finansbank (QNBFB) $350 100% 367-day $198 Libor+2.15% €135 Euribor+1.75%
Nov-21 Garanti (GARAN) $643 101% 367-day $365 Libor+2.15% €247 Euribor+1.75%
Nov-21 Isbank (ISCTR) $817 107% 367-day $328 Libor+2.15% €434 Euribor+1.75%
Nov-21 Eximbank $645 115% 1-year $162 Libor+2.30% €419 Euribor+1.90%
Oct-21 Denizbank $840 110% 367-day $418 Libor+2.15% €363 Euribor+1.75%
Oct-21 Yapi Kredi Bank (YKBNK) $822 96% 367-day $361 Libor+2.15% €397 Euribor+1.75%
Oct-21 TEB $380 114% 367-day $113 Libor+2.15% €231 Euribor+1.75%
Oct-21 Akbank (AKBNK) $701 88% 367-day $460 Libor+2.15% €207 Euribor+1.75%