Turkey’s Akbank renews syndicated loan at 83% renewal ratio

Turkey’s Akbank renews syndicated loan at 83% renewal ratio
Turkish lenders' loan debt repayment obligations (red) are going down. The real sector's external debt repayment obligations (green) are going up. Overall financing needs remain high.
By Akin Nazli in Belgrade October 9, 2019

Turkish private lender Akbank, owned by conglomerate Sabanci, has obtained an $810mn-equivalent and 367-day syndicated loan in two tranches of $402mn with an all-in cost at Libor+2.25% and €373.5mn at Euribor+2.10%, it said on October 8 in a stock market filing.

The renewal rate of the syndicated loan stood at 83%, according to Reuters’ calculations.

On September 3, an Akbank spokesman told Bloomberg that the lender was offering a 185bp margin on the USD tranche and 170bp on the EUR portion, lower than the Libor+200bp and Euribor+190bp obtained in March.

In March, Akbank obtained a $700mn and 367-day syndicated loan. A $356mn tranche came with an all-in cost at Libor+2.50% while a €303mn tranche was pegged at Euribor+2.40%.

In September last year, Akbank obtained a 367-day and $985mn syndicated loan with costs rising by 140bp compared to April 2018. They were arranged at Libor+275bp for a $285mn tranche and Euribor+265bp for a €591mn tranche.

Major syndicated loan renewals by Turkish lenders
Date Bank Total ($) Renewal Rate (%) Maturity (days) $mn Spread over Libor (bp) € Tranche Spread over Euribor (bp)
Sep-19 Akbank 810 83 367 402 225 373.5 210
Aug-19 ING Turkey 305 49 367 96 250 190 240
Jul-19 TSKB 177 80 367 67.5 200 97.5 200
May-19 Isbank 1000 69 367 323.50 250 644.9 240
May-19 Garanti 784 63 367 326 250 408.75 240
May-19 Yapi Kredi 1000 77 367 350.4 250 606.8 240

Turkish lenders’ syndicated loan renewal costs fell in the spring season of this year after booming in the autumn season of 2018 following the country’s currency crisis that peaked in August.

However, the renewal ratios are low, the costs remain higher than the pre-crisis costs and two-year maturities have disappeared despite positive headlines on Turkey’s progress with its economic recovery dominating media reports.

The Libor+2.50% and Euribor+2.40% costs seen in spring 2019 were almost double the Libor+1.30%s and Euribor+1.20%s seen a year back, while the 2-year, 1-day tranches seen in spring 2018 are no longer available.

On a positive note, the costs in the spring of this year compared lower than the Libor+2.75%s and Euribor+2.65%s seen in autumn 2018.

Akbank has again set the benchmark for its peers entering the Turkish lenders’ autumn syndicated loan refinancing season.

Along with Akbank, Isbank, TEB and Vakifbank were also in the market. Each bank was expecting a margin cut, Global Capital reported on October 3 in a story entitled “Turkish banks achieve tighter pricing in refi round”.

On October 8, the publication reported in a story entitled “Trump Turkey tweets impact ‘muted’” that US President Donald Trump’s Twitter salvo, warning Turkey that he could obliterate its economy if Ankara went too far with its planned incursion into northeastern Syria, only had a muted effect on the Turkish curve, with investors' scepticism towards Trump growing.

Yapi Kredi Bank has a syndicated loan worth around $1bn due in October.

According to the latest central bank data, Turkey’s overall external debt repayment obligations for the next 12-month period stood at $179.2bn at end-July.

The figure stood at a record high of $185.9bn at end-February 2018 but declined to $173.9bn at end-October 2018 as a result of the ‘curing’ effect of the August currency crunch. But a significant recovery in Turkey’s external financing needs has not been observed since then.

When lenders’ and corporates’ obligations to their branches and affiliates abroad are excluded, Turkey was obliged to repay $159bn in foreign debts across the next 12 months as of end-July, up from $155.3bn as of end-2018.

Turkish lenders’ credit repayments across the next 12 months amounted to $38bn at end-July, down from $44.2bn at end-2018, while the real sector’s debt rose to $81.3bn from $74.3bn.

The data suggests that Turkish banks have been transferring their external debt weight to the real sector, but Turkey’s overall exposure has not shown an improvement since the sharp decline in October 2018.