Denizbank, a unit of Emirates NBD, has obtained an $845mn ESG-linked 367-day syndicated loan in tranches of $425mn and €393mn, Denizbank said on November 15.

The costs were released in line with the benchmarks set by Akbank (AKBNK), a unit of Turkish conglomerate Sabanci Holding (SAHOL), at the guaranteed overnight financing rate (SOFR) plus 350bp and the euro interbank offered rate (Euribor) plus 325bp.

A total of 48 banks from 22 countries participated in the syndicated loan. The facility will be used for financing international trade activities.

Emirates NBD Capital Limited, Dubai-based Mashreq PSJC (Mashreqbank), US-based The Commercial Bank (TCB) and Standard Chartered Bank (London/STAN) acted as co-ordinators in the deal, while SMBC (Sumitomo Mitsui Banking Corporation/Tokyo/8316) Nikko was ESG co-ordinator.

The rollover rate stood at 134%. In November 2022, Denizbank obtained a $605mn loan at SOFR+425bp and Euribor+400bp. The renewal rate stood at 78%.

In line with local peers, Denizbank, the ninth largest bank in Turkey with Turkish lira (TRY) 746bn ($27bn) of assets at end-June, has a B-/Stable (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.

Chart: Denizbank’s wholesale funding composition as of end-September.

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).

They release identical costs, while some of the lenders, particularly smaller ones, pay higher fees.

In recent years, Akbank has set the Turkey benchmark for the interest rates each season. In April 2022 and 2023, government-run 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 season this year, a total of nine Turkish banks will roll a combined sum of $4bn. The costs are 75bp lower compared to a year ago. The rollover rates have been coming in at above 100%.

Despite the significant recovery in spreads, the costs still stand close to the double digits as the benchmarks remain painfully high.

SOFR persists above the 5% level, compared with the 0.05% seen in October 2021, while 12-month Euribor remains above the 4% level, compared with the minus 0.5% recorded in October 2021.

As things stand, hopes for lower costs are now focused on 2024.

In the autumn refinancing season of 2022, nine Turkish banks rolled a combined sum of $6bn at a rollover rate of 77%. The costs were in line with the benchmarks set by Akbank, namely SOFR+4.25% and Euribor+4.00%.

In the spring season of 2023, 11 banks renewed a combined sum of $7bn at a combined rollover rate of 88%. All costs were reported as in line with the benchmarks set by Akbank, namely SOFR+4.25% and Euribor+4.00%.

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.

Nevertheless, the banks’ syndicated loan renewals are a good indicator for following developments in the sustainability of Turkey’s external debt burden.

Table: Full list of Turkish banks’ syndicated loan renewals