Reduced global appetite ‘may be delaying’ Turkey’s traditional first month eurobond

Reduced global appetite ‘may be delaying’ Turkey’s traditional first month eurobond
By Akin Nazli in Belgrade January 7, 2020

Market players have been outlining their expectations for an anticipated Turkish Treasury eurobond auction. Turkey usually holds one in the first month of the new year.

“First working week of the year—Turkey new issue has to be in the pipeline! A January new issue by Turkey—you can almost set your watch by it,” wrote Timothy Ash of BlueBay Asset Management on January 7 in a note to investors.

The previous day, unnamed bankers told Reuters that the Treasury could proceed with a eurobond issue this week but that it could also be delayed by several weeks due to reduced global appetite for such debt.

Turkish Treasury's Eurobond Issues in 2019
Issue Date Currency Size Maturity Coupon (%) Price Yield (%) Spread Euro Cost (%)
14.11.2019 USD 2.5bn 14.11.2024 5.6 99.57 5.70 UST+407bp 3.319
10.07.2019 USD 2.25bn 10.08.2024 6.35 99.563 6.45 UST + 470 bps 3.803
26.03.2019 USD 1bn 26.04.2029 7.625 103.3 7.15 UST + 454 bps 4.859
21.02.2019 USD (Sukuk) 2bn 21.02.2022 5.8 100 5.80 MS + 318 bps  
31.01.2019 EUR 1.25bn 31.03.2025 4.625 99.36 4.75 MS + 446 bps  
16.01.2019 USD 2bn 26.04.2029 7.625 99.555 7.68 UST + 497bp 4.965
Turkish Treasury's Eurobond Issues in 2018
14.11.2018 EUR 1.5bn 16.02.2026 5.2 99.73 5.25 MS + 456.4 bp  
23.10.2018 USD 2bn 23.12.2023 7.25 98.917 7.50 UST + 447.5 bp  
24.04.2018 USD 2bn 24.10.2028 6.125 99.427 6.20 UST + 336.8 bp  
17.01.2018 USD 2bn 17.02.2028 5.125 99.411 5.20 UST + 266.7 bp  
Turkish Treasury's Eurobond Issues in 2017
13.09.2017 USD 1.75bn 11.05.2047 5.75 101 5.70 UST + 300.5 bp  
14.06.2017 EUR 1bn 14.06.2025 3.25 99 3.377 MS + 285 bp  
11.05.2017 USD 1.75bn 11.05.2047 5.75 98 5.875 UST + 286.7 bp  
06.04.2017 USD (Sukuk) 1.25bn 06.04.2023 5 100 5 MS + 285 bp  
23.02.2017 USD 1.25bn 25.03.2027 6 103 5.65 UST + 320.5 bp  
23.01.2017 USD 2bn 25.03.2027 6 99 6.15 UST + 375.7 bp  
source: treasury

Turkey’s 5-year credit default swaps (CDS) have been around 280bp since mid-December.

Fitch Ratings rates Turkey at BB-/Stable, three notches below investment grade. Moody’s Rating Services rates Turkey at B1/Negative, four notches below investment grade, while Standard & Poor’s has Turkey at B+/Stable, also four notches below investment grade.

At the latest eurobond auction held in November, the Turkish Treasury sold $2.5bn of 5-year eurobonds with a 5.60% coupon and a yield to the investor of 5.70%.

Major Eurobond Issues by Turkish issuers
Issuer ISIN Coupon Volume (USD mn) End of placement Maturity date
Fibabank XS2096028571 Floating 30 12/31/2019 12/31/2029
Garanti Bank XS2094608580 5.25% 50 12/12/2019 12/20/2024
Mersin Port XS2071397850 5.375% 600 11/07/2019 11/15/2014
Treasury US900123CW86 5.60% 2500 11/06/2019 11/14/2024
Isbank XS2041003901 8.10% 50 08/07/2019 12/03/2029
Aktifbank XS2034164074 6.50% 40 07/31/2019 08/01/2029
Kuveyt Turk Bank XS2028862998 9.13% 200 07/02/2019 Perpetual
Treasury US900123CV04 6.35% 2250 07/10/2019 08/10/2024
Vakifbank     150 06/25/2019 2024
Vakifbank XS1970705528 8.125% 600 03/21/2019 03/28/2024
Sisecam XS1961010987 6.95% 700 03/20/2019 03/14/2026
Treasury US900123CT57 7.625% 1000 03/26/2019 04/26/2029
Yapi Kredi Bank XS1958649854 8.25% 500 03/07/2019 10/15/2024
Koc Holding XS1961766596 6.50% 750 03/05/2019 03/11/2025
QNB Finansbank XS1959391019 6.875% 500 02/28/2019 09/07/2024
Yapi Kredi Bank XS1957348441 FRN 321.6 02/25/2019 11/25/2027
Turk Telekom XS1955059420 6.875% 500 02/21/2019 02/28/2025
Treasury (sukuk) XS1816199373 5.80% 2000 02/21/2019 02/21/2022
Treasury XS1843443356 4.63% EUR1.25bn 01/31/2019 03/31/2025
Eximbank XS1917720911 8.25% 500 01/24/2019 01/24/2024
Treasury US900123CT57 7.625% 2000 01/16/2019 04/26/2029
source: cbonds, intellinews

In November, Istanbul Mayor Ekrem Imamoglu confirmed that the municipality was seeking Treasury approval for a $500mn eurobond sale.

On November 8, government-run Vakifbank received approval from the Turkish capital markets board (SPK) to issue €1bn worth of mortgage-backed securities abroad.

On December 23, Vakifbank said in a stock exchange filing that it received approval from the local banking watchdog BDDK to recall its 10-year subordinated (Tier II) eurobonds worth $500mn. The paper carries a call option at the end of the fifth year and Vakifbank will redeem the paper on February 3.

Vakifbank issued the paper in January 2015 at a yield of 6.95%.

Also on December 23, Vakifbank applied to the SPK to issue up to $5bn worth of eurobonds.

On November 18, private lender Yapi Kredi cut the issuance limit for its mortgage-backed eurobonds, already approved by the SPK, to €500mn from €1bn.

Reuters reported on October 18 that national flag carrier Turkish Airlines had mandated lenders for eurobonds or Enhanced Equipment Trust Certificates. However, nothing has been heard of the move since then.

The next scheduled eurobond redemption by the Turkish Treasury is set for May 18, 2020. A repayment of €2bn for 10-year EUR-denominated papers is scheduled. Also in 2020, the Treasury will, on June 5, redeem $2bn in 15-year USD papers. On December 3, it will redeem JPY60mn in samurai bonds.

Turkish Treasury's Outstanding Eurobonds
Issue Date Maturity Year Currency Face (mn) Face ($mn) Coupon (%) Type ISIN
03/09/2008 11/03/2019 10.5 USD 1,500 1,500 7.000 Bond US900123BD15
01/02/2007 02/04/2019 12.2 EUR 1,250 1,618 5.875 Bond XS0285127329
30/04/2009 07/11/2019 10.5 USD 1,500 1,500 7.500 Bond US900123BF62
20/04/2010 18/05/2020 10.1 EUR 1,500 1,651 5.125 Bond XS0503454166
12/11/2010 18/05/2020 9.5 EUR 500 550 5.125 Re-open XS0503454166
02/06/2005 05/06/2020 15 USD 1,250 1,250 7.000 Bond US900123AX87
23/02/2007 05/06/2020 13.3 USD 750 750 7.000 Re-open US900123AX87
01/12/2017 07/12/2020 3 JPY 60,000 548 1.810 Bond JP579200AHQ2
11/03/2011 18/03/2021 10 JPY 180,000 1,643 1.870 Bond JP579200ABF8
11/03/2010 30/03/2021 11.1 USD 1,000 1,000 5.625 Bond US900123BH29
05/08/2010 30/03/2021 10.7 USD 1,000 1,000 5.625 Re-open US900123BH29
01/06/2016 08/06/2021 5 USD 1,000 1,000 4.251 Sukuk XS1303467077
05/11/2013 12/11/2021 8 EUR 1,250 1,376 4.350 Bond XS0993155398
13/02/2019 21/02/2022 3 USD 2,000 2,000 5.800 Sukuk XS1816199373
08/03/2012 15/03/2022 10 JPY 90,000 822 1.470 Bond JP579200ACF6
17/10/2011 25/03/2022 10.4 USD 1,000 1,000 5.125 Bond US900123BY51
18/01/2012 26/09/2022 10.7 USD 1,500 1,500 6.250 Bond US900123BZ27
16/02/2012 26/09/2022 10.6 USD 1,000 1,000 6.250 Re-open US900123BZ27
08/01/2013 23/03/2023 10.2 USD 1,500 1,500 3.250 Bond US900123CA66
30/03/2017 06/04/2023 6 USD 1,250 1,250 5.004 Sukuk XS1586385178
08/04/2014 11/04/2023 9 EUR 1,000 1,101 4.125 Bond XS1057340009
16/10/2018 23/12/2023 5.2 USD 2,000 2,000 7.250 Bond US900123CR91
22/01/2014 22/03/2024 10.2 USD 2,500 2,500 5.750 Bond US900123CF53
02/07/2019 10/08/2024 5.1 USD 2,250 2,250 6.350 Bond US900123CV04
17/09/2014 25/09/2024 10 JPY 100,000 913 1.050 Bond JP579200AEM8
06/11/2019 14/11/2024 5 USD 2,500 2,500 5.600 Bond US900123CW86
18/11/2014 25/11/2024 10 USD 1,000 1,000 4.489 Sukuk XS1141043296
13/01/2005 05/02/2025 20.1 USD 2,000 2,000 7.375 Bond US900123AW05
01/11/2006 05/02/2025 18.3 USD 1,250 1,250 7.375 Re-open US900123AW05
24/01/2019 31/03/2025 6.2 EUR 1,250 1,376 4.625 Bond XS1843443356
07/06/2017 14/06/2025 8 EUR 1,000 1,101 3.250 Bond XS1629918415
07/11/2018 16/02/2026 7.3 EUR 1,500 1,651 5.200 Bond XS1909184753
08/04/2015 14/04/2026 11 USD 1,500 1,500 4.250 Bond US900123CJ75
02/03/2016 09/10/2026 10.6 USD 1,500 1,500 4.875 Bond US900123CK49
20/10/2016 09/10/2026 10 USD 1,500 1,500 4.875 Re-open US900123CK49
18/01/2017 25/03/2027 10.2 USD 2,000 2,000 6.000 Bond US900123CL22
23/02/2017 25/03/2027 10.1 USD 1,250 1,250 6.000 Re-open US900123CL22
09/01/2018 17/02/2028 10.1 USD 2,000 2,000 5.125 Bond US900123CP36
16/04/2018 24/10/2028 10.5 USD 2,000 2,000 6.125 Bond US900123CQ19
09/01/2019 26/04/2029 10.3 USD 2,000 2,000 7.625 Bond US900123CT57
26/03/2019 26/04/2029 10.1 USD 1,000 1,000 7.625 Re-open US900123CT57
10/01/2000 15/01/2030 30 USD 1,500 1,500 11.875 Bond US900123AL40
30/01/2013 07/02/2033 20 JPY 18,400 168 2.680 Bond JP579200ADE7
07/01/2004 14/02/2034 30.1 USD 1,500 1,500 8.000 Bond US900123AT75
04/01/2006 17/03/2036 30.2 USD 1,500 1,500 6.875 Bond US900123AY60
14/11/2006 17/03/2036 29.3 USD 750 750 6.875 Re-open US900123AY60
17/01/2007 17/03/2036 29.2 USD 500 500 6.875 Re-open US900123AY60
27/02/2008 05/03/2038 30 USD 1,000 1,000 7.250 Bond US900123BB58
05/01/2010 30/05/2040 30.4 USD 2,000 2,000 6.750 Bond US900123BG46
05/01/2011 14/01/2041 30 USD 1,000 1,000 6.000 Bond US900123BJ84
26/06/2012 14/01/2041 28.6 USD 1,000 1,000 6.000 Re-open US900123BJ84
11/12/2012 14/01/2041 28.1 USD 1,000 1,000 6.000 Re-open US900123BJ84
09/04/2013 16/04/2043 30 USD 1,500 1,500 4.875 Bond US900123CB40
13/01/2015 16/04/2043 28.3 USD 1,500 1,500 4.875 Re-open US900123CB40
12/02/2014 17/02/2045 31 USD 1,500 1,500 6.625 Bond US900123CG37
04/05/2016 17/02/2045 28.8 USD 1,500 1,500 6.625 Re-open US900123CG37
04/05/2017 11/05/2047 30 USD 1,750 1,750 5.750 Bond US900123CM05
13/09/2017 11/05/2047 29.7 USD 1,750 1,750 5.750 Re-open US900123CM05
source: treasury

The next scheduled eurobond redemption by a Turkish lender is scheduled for January 24, 2020 when private lender Akbank will repay $500mn (XS1111101314).

Also in 2020, state-run Halkbank will repay, on February 5, $750mn (XS0882347072) while Industrial Development Bank of Turkey (TSKB) will redeem, on April 22, $350mn and Isbank will repay, on April 30, $750mn.

For the Turkish real sector, the next scheduled eurobond redemption is scheduled for April 24, 2020 when Koc Holding will repay $750mn (XS0922615819) of debt which was already refinanced in March last year.

Also in 2020, Yasar Holding will redeem, on May 6, $172mn (XS1132450427) while glassmaker Sisecam will repay, on May 9, $300mn, already refinanced in March last year. Mersin Port will redeem on, August 12, $450mn ((XS0957598070), already refinanced in November.

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