Istanbul-listed Garanti BBVA renews syndicated loan at 73% rollover rate

Istanbul-listed Garanti BBVA renews syndicated loan at 73% rollover rate
/ bne IntelliNews
By Akin Nazli in Belgrade June 4, 2023

Garanti BBVA (GARAN), a unit of BBVA (Madrid/BBVA), has obtained a 367-day syndicated loan in tranches of $199mn and €219mn, the lender said on June 2.

A total of 26 banks from 13 different countries participated in the facility.

The loan is to be used to finance international trade activities while the sustainability criteria include commitments to provide loans to women-led and micro-scale companies in Turkey’s earthquake-hit region.

Costs were in line with the benchmarks set by Akbank (AKBNK), the big-cap unit of Turkish conglomerate Sabanci Holding (SAHOL).

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

The renewal rate stood at 73%, while spreads remained at record high levels.

Story chart: Turkish companies’ external debt rollover rates.

In May 2022, Garanti obtained a 367-day syndicated loan in tranches of $284mn and €291mn at SOFR+2.75% and Euribor+2.10%. The rollover rate stood at 100%.

The bank has another syndicated facility. In November 2022, it obtained a 367-day syndicated loan in tranches of $155mn and €239mn. The rollover rate stood at 61%. The costs stood at SOFR+4.25% and Euribor+4.00%.

Chart: Garanti’s funding composition at end-March.

In line with local peers, Garanti, the fifth largest bank in Turkey with Turkish lira (TRY) 1.3 trillion ($63bn) worth of total assets at end-March, has a B-/Negative (one notch below Turkey’s sovereign rating and six notches below investment grade) from Fitch Ratings and a B3/Stable (six notches below investment grade in line with Turkey’s sovereign rating) from Moody’s Investors Service.

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

Turkish banks release identical costs in syndicated loan renewals while some of the lenders, particularly smaller ones, pay higher fees.

Across recent years, Akbank has set the Turkey benchmark for the interest rates each season. In April 2022 and 2023, Ziraat Bank launched the spring seasons. However, Ziraat could not provide the costs this year. It awaited Akbank’s released costs to provide its costs.

In the autumn refinancing season of 2022, nine Turkish banks renewed an exchange rate-adjusted combined sum of $5.6bn, obtaining $4.3bn worth of fresh loans. The rollover rate stood at 77%.

The private banks’ renewal rates were very low, in the 60-70%s, while the spreads were at record high levels. QNB Finansbank registered the highest rollover rate of 104%. Government-run banks registered 90-100% rates.

The all-in costs were in line with the benchmarks set by Akbank (AKBNK), namely SOFR+4.25% for the USD tranche and Euribor+4.00% for the EUR tranche (see full list below).

In the spring season of 2022, 11 banks renewed $8bn of loans at a combined renewal rate of 92% with borrowing amounting to $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 spring season of this year, 11 banks are to renew a combined sum of $7bn. And, in the autumn season, nine banks are to roll over a combined sum of $4bn.

The share of syndicated loans in Turkey’s and Turkish banks’ external funding composition has declined in recent years. Turkey rolls over a combined sum of around $150-200bn each year.

Benchmarks remain painfully high as SOFR remains above the 5%-level, compared to the 0.05% seen in October 2021, while 12-month Euribor is testing the 4%-level, compared to the minus 0.5% recorded in October 2021.

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

Recently, all the benchmarks have been on the rise in parallel with the global monetary tightening trend, which is expected to be reversed this year.

    Total Renewal Maturity Tranche Cost Tranche Cost
    (mn) Rate (days) 1 1 2 2
Jun-23 Garanti BBVA (GARAN) $433 73% 367-day $199 SOFR+4.25% €219 Euribor+4.00%
Jun-23 Yapi Kredi (YKBNK) $580 78% 367-day $202 SOFR+4.25% €353 Euribor+4.00%
May-23 QNB Finansbank (QNBFB) $329 102% 367-day $171 SOFR+4.25% €144 Euribor+4.00%
May-23 Vakifbank (VAKBN) $817 81% 367-day $190 SOFR+4.25% €576 Euribor+4.00%
May-23 Turk Eximbank $670 89% 364-day $54   €522 Chinese yuan 325mn
Apr-23 Akbank (AKBNK) $500 71% 367-day $246 SOFR+4.25% €233 Euribor+4.00%
Apr-23 Ziraat Bank $1,300 103% 367-day $432   €779  
Nov-22 Garanti BBVA (GARAN) $401 65% 367-day $155 SOFR+4.25% €239 Euribor+4.00%
Nov-22 QNB Finansbank (QNBFB) $545 104% 367-day $185 SOFR+4.25% €253 Euribor+4.00%
Nov-22 Vakifbank (VAKBN) $560 91% 367-day $223 SOFR+4.25% €328 Euribor+4.00%
Nov-22 Isbank (ISCTR) $535 69% 367-day $191 SOFR+4.25% €331 Euribor+4.00%
Nov-22 Turk Eximbank $588 101% 1-year €404   €136 Chinese yuan 350mn
Nov-22 Denizbank $606 78% 367-day $277 SOFR+4.25% €330 Euribor+4.00%
Nov-22 Yapi Kredi Bank (YKBNK) $458 61% 367-day $210 SOFR+4.25% €249 Euribor+4.00%
Oct-22 TEB $262 77% 367-day $64 SOFR+4.25% €200 Euribor+4.00%
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%

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