Turkey's Garanti BBVA (GARAN) said on October 8 that it had sold $700mn of a 10.5-year subordinated Tier II eurobond (XS3205715611) at a coupon rate and yield-to-investor of 7.625% (priced at par).

BBVA, Merrill Lynch, Citigroup, Societe Generale, Abu Dhabi Commercial Bank, Mashreqbank, ING Bank and SMBC Bank acted as intermediaries in the deal.

The papers are callable after five and a half years. The market norm for Turkish banks has generally been to call Tier IF debt after five years.

On September 23, Turkey's Isbank (ISCTR) sold $500mn of a 10.5-year subordinated Tier II eurobond at a coupon rate of 7.375% (priced at 100).

Garanti has a BB-/Stable rating from Fitch Ratings and a Ba3/Positive from Moody’s Investors Service.

Turkey’s CDS are hovering above the 250-level, while the yield on the Turkish government’s 10-year eurobonds is more or less steady below the 7%-level.

US Treasury yields fell

In June, Garanti sold a $500mn 10.5-year (XS3106498051) Tier II paper at a coupon rate of 8.125% (priced at 99.451).

In November last year, it sold $750mn of a Tier II 10-year eurobond at a coupon rate of 8.125% (priced at 99.985).

The spreads over US Treasuries have little changed but the decline in US papers has provided more favourable conditions for the lender.

Currently, Garanti has five outstanding eurobonds with a combined nominal value of $3bn. All of them are Tier II papers.

Table: Outstanding eurobonds sold by Garanti BBVA (GARAN).

In November last year, the lender launched a cash tender offer for its outstanding Tier 2 paper (XS1617531063/US900148AE73) due 2027. It bought back $134mn of the paper. A total of $616mn worth of the paper remains outstanding.

In 2022, Garanti opted not to call the $750mn paper in question, sold on May 23, 2017.

Garanti’s decision became an issue since, as mentioned, the market norm for Turkish banks has generally been to call Tier II debt after five years.

A few peers followed Garanti’s path. However, the situation did not trigger any substantial problems despite some concerns that generated headlines in the financial media.

Table: Major Tier II eurobond auctions held by Turkish banks.

Islamic lender Vakif’s debut AT1 sukuk

Vakif Katilim Bank said on October 8 that it had sold $500mn of a subordinated Additional Tier 1 (AT1) eurobond at a coupon rate and yield-to-investor of 8.375% (priced at par).

Abu Dhabi Islamic Bank (ADIB), Bank ABC, Dubai Islamic Bank (DIB), Emirates NBD Capital, First Abu Dhabi Bank, Goldman Sachs, HSBC, Kuwait Finance House (KFH), Mashreqbank, Standard Chartered and Warba Bank acted as intermediaries in the deal.

The paper is the first eurobond sold by Vakif Katilim, launched in 2015.

AT1 bonds are perpetual. The paper is callable after a period of five and a quarter years, namely in April 2031.

Turkish banks generally recall their subordinated papers after five years. They are supposed to provide a maturity date for registration purposes and they write down 10 years for AT1 papers.

Vakif Katilim has a B+/Stable rating from Fitch Ratings.

On September 29, government-run Vakifbank (VAKBN), the parent company of Vakif Katilim, sold $500mn of a subordinated Additional Tier 1 (AT1) eurobond (XS3196022597) at a coupon rate and yield-to-investor of 8.20%.

Table: Major AT1 eurobond issues by Turkish banks.

Turk Telekom sells green eurobond

Turk Telekom (TTKOM) has sold a $600mn green eurobond (XS3194824747) due 2032 at a coupon rate and yield-to-investor of 6.95% (priced at 100), the company said on October 7.

ING, JPMorgan and MUFG acted as intermediaries in the deal.

Turk Telekom has a BB-/Stable rating from Fitch Ratings and a BB/Stable rating from Standard & Poor’s.

Currently, the company has two outstanding eurobonds.

In 2024, it sold the $500mn green eurobond (XS2820499619) due 2029 at a coupon rate of 7.375%.

Table: Major green eurobond issues by Turkish issuers.

On September 25, TT Varlik Kiralama, a unit of TTKOM that sells Islamic papers, received an approval from Turkey’s capital markets board (SPK) to sell up to $1bn worth of sukuk eurobonds.

Turkey’s sovereign wealth fund (TWF/TVF) is the dominant player in the local telecoms market as it controls Turkcell (TCELL) and Turk Telekom (TTKOM).

Turk Telekom’s FX loans

Separately, TTKOM said on September 26 that it obtained a $222mn loan from HSBC (London/HSBA) under insurance coverage provided by Finland’s export credit agency Finnvera.

The final maturity of the facility is May 2036 and the average maturity stands at 4.4 years. The total cost, including the insurance premium and the other upfront costs, was set at Term SOFR plus 237bp per annum.

In 2020, TTKOM obtained a $189mn syndicated loan under coverage provided by Finnvera. The loan has a final maturity of September 2030 with the average maturity standing at 4.3 years. Citibank, JP Morgan and Societe Generale participated in the loan.

TTKOM is a long-term customer of Nokia Oyj (Helsinki/NOKIA).

Table: Major foreign loans obtained by Turk Telekom /TTKOM).

Chinese loans

On September 30, TTKOM said that it obtained two loans worth €120mn in total from the Export-Import Bank of China (Chexim/China Eximbank) under insurance coverage provided by China Export and Credit Insurance Corporation (Sinosure).

The final maturity of the facilities was set as September 2035 with the average maturity standing at 5.6 years.

The interest rate was set at Euribor plus 150bp per annum while the total cost, including the insurance premium and the other upfront costs, was set at Euribor plus 258bp per annum.

TTKOM will use the loan to finance its solar plant investment in the town of Zara in Turkey’s eastern Sivas province.

This is the fifth Chexim loan obtained by TTKOM under the Sinosure coverage. (See the other loans in the table above).

Finally, TTKOM said on October 1 that it obtained a $250mn loan from the Industrial & Commercial Bank of China (ICBC/Shanghai/601398).

The final maturity of the facility was set as September 2030 with the average maturity standing at 4.9 years.

The interest rate was set at SOFR plus 235bp per annum while the total cost including the upfront costs was set at SOFR plus 256bp per annum.

TTKOM is a long-term customer of Huawei Turkey, a unit of China’s Huawei.

Aydem redeems early

On October 1, small-cap renewable energy producer Aydem Yenilenebilir Enerji (AYDEM) said that it redeemed a green eurobond (XS2368781477/US054644AA72), which was sold in 2021 and was to mature in 2027.

The redemption was executed at a price of $428 against a nominal amount of $414.

The 5.5-year (3.5-year without principal payment) paper was initially sold at an amount of $750mn. The company later on bought back $76mn worth of the paper. It has also delivered two principal payments this year in the amount of $67mn.

On September 23, Aydem sold $550mn of a five-year debut green eurobond (XS3065322862) at a coupon rate of 9.875% and a yield-to-investor of 10.375% (priced at 98.269) to finance the early redemption of the bond in question.