Busiest eurobond week for Turkey in close to three years

Busiest eurobond week for Turkey in close to three years
By Akin Nazli in Belgrade March 7, 2019

A roadshow on a move by Turkey’s top glass maker Sisecam to sell 7-year USD eurobonds produced initial price guidance of 7.375%-7.5%, Reuters reported on March 7.

Also on March 7, Reuters reported that a roadshow on Yapi Kredi Bank’s plan to sell $500mn worth of 5.5-year eurobonds gave initial price guidance of 8.25%. Citi, Emirates NBD Capital, Morgan Stanley, SMBC Nikko, Standard Chartered Bank and UniCredit were leading the bookbuilding.

Yapi Kredi has executed future flow transactions with maturities of 2025 and 2027 under its "diversified payment rights" programme for an amount of $711.6mn together with treasury transactions, it said on February 25 in a stock market filing.

Reporting on how two Turkish borrowers—Sisecam and Yapi Kredi—had hit the market on March 7, with Sisecam returning to the market after a six-year hiatus, Global Capital wrote that in the wake of the Koc Holding eurobond deal this week, there were now three deals that made this Turkey’s busiest week on the debt markets in almost three years.

Turks continue piling up FX
As Turkish private companies rush into selling eurobonds following government debt sales, Turks continue to buy FX. Turkish resident individuals’ FX deposits at local lenders rose by another $700mn to $103.6bn as of March 1, according to the central bank’s weekly bulletin published on March 7.

Turkish resident individuals’ FX deposits saw a record high level of $104.1bn in April 2016.

They increased their total FX deposits by $13.8bn in an uninterrupted 21 weeks of growth from $89.8bn as of October 5.

In August last year, Turkish resident individuals sold $8bn of FX deposits to benefit from the high USD/TRY rate that came as the lira crisis reached its nadir.

Local corporates increased their FX deposits by $350mn w/w to $67.4bn as of March 1, and, consequently, Turkish residents’ overall FX deposits rose by $1bn w/w to $171bn.

Inflows into bourse, outflows from gov’t domestic bonds
Meanwhile, net portfolio inflows into Borsa Istanbul so far this year rose to $1.39bn as of March 1 versus net outflows of $707mn from government domestic bonds, the central bank announced on March 7.

Sisecam shares were down 0.45% d/d to TRY6.62 as of 15:30 local time on March 7 while the Borsa Istanbul benchmark BIST-100 index was up 0.36% to 103,829. The annual gain on the BIST-100 stood at 14% versus a 38% y/y rise in the Sisecam share price.

The BIST-100 was moving around the 87,000s on January 3 but rallied into the 104,000s by January 29 on the back of bank shares. Sisecam shares were trading in the 5.20s on January 3.

Seker Invest’s target price for Sisecam stands at TRY6.98, according to the Istanbul-based brokerage house’s recommendation list released on March 7.

Sisecam has a 1.98% weighting in the iShares MSCI Turkey ETF.

Moody’s Investors Service rates Sisecam at Ba2/Negative, the rating agency said on March 1 in an update to its credit analysis for Sisecam. Also on March 1, Fitch Ratings said in a written statement that it affirmed Sisecam at BB+/Negative.

Fitch has also affirmed Sisecam’s senior unsecured rating and existing $500mn 2020 Eurobond at BB+.

In August last year, Standard & Poor’s downgraded its long-term issuer rating of Sisecam to B+ with a "Negative" outlook.

In April last year, the company decided to issue up to $750mn worth of debt instruments on foreign markets. Sisecam was to transfer some parts of the proceeds from the planned eurobond issue to its subsidiaries Trakya Cam, Anadolu Cam, Soda Sanayii and Pasabahce depending on the guarantees provided by the affiliates in question.

Sisecam subsidiaries‘ guarantees
In separate bourse filings on April 11, Sisecam’s BIST-listed subsidiaries announced the extent of the guarantees that they have provided for Sisecam’s bond issue. Trakya Cam said it provided up to $250mn worth of guarantees while Anadolu Cam said it provided up to $150mn in guarantees and Soda Sanayii said it provided up to $50mn in guarantees.

Sisecam benefitted from its $452mn net long FX position in 2018 as most of its cash is held in hard currencies, the company said on February 4 in an earnings review.

Sisecam’s revenues grew 37% y/y to TRY15.6bn, of which 65% was international revenues, in 2018 while its net income rose by 90% y/y to TRY2.33bn, according to its earnings review.

Meanwhile, company revenues in USD terms slightly fell to $2.94bn in 2018 from $2.98bn in 2017 and net income rose to $440mn from $323mn, according to the Sisecam website.

Sisecam is the third largest glassware, fourth largest glass packaging and fifth largest flat glass manufacturer in the world in terms of production capacity. It has more than 21,000 employees, production in 13 countries and sales in 150 countries.

The company is 75%-owned by Is Bankasi, one of Turkey’s largest private lenders, and by Is Bankasi subsidiaries, while 25% of its shares are in free floataccording to an investor presentation on Sisecam’s website.

In May 2018, local authorities declared a disaster when chemicals from the Sisecam Soda Lukavac soda ash factory in northern Bosnia & Herzegovina polluted the Spreca river, killing fish and damaging surrounding land.