Turkey’s Ziraat Katilim sells $500mn 3-year debut sukuk paper at 9.375% coupon

By bne IntelIiNews November 5, 2023

Ziraat Katilim Varlik Kiralama has sold $500mn of a debut sukuk paper (XS2699906512) due November 2026 at a coupon rate of 9.375% (priced at 99.996), the lender said on November 3.

Dubai Islamic Bank (Dubai/DIB), Emirates NBD Capital Limited, HSBC (London/HSBA) and Standard Chartered Bank (London/STAN) acted as intermediaries in the deal.

In October 2022, in the last sukuk sale by a Turkish issuer abroad, the Treasury sold $2.5bn of three-year papers at a coupon rate of 9.758% and a yield to investor of 9.75%.

Looking at the global markets, there is no turbulence of note impacting sentiment. The US Treasury yields, which were sailing through the 6%s across the curve, are currently taking a breather around the 5%-level.

The USD Index (DXY) fell into the 105s after pushing through the 107-level, still up from the 99s seen in July.

As a result, Turkey’s five-year credit default swaps (CDS) have once again fallen below the 400-level in parallel with EM peers, while the yield on the Turkish government’s 10-year eurobonds has declined below the 9%-level.

The USD/TRY rate is, meanwhile, still heading north. On September 21, the pair once again broke through the horizontal barrier set at the 27.00-level. The latest record high, registered on November 3, is 28.5666.

The Turkish government’s ‘five/10 kurus (Turkish cents, pronounced as kurush) devaluation per day policy’ in the struggle to stop the slide is still in place. As of November 3, the latest daily trench was dug around the 28.40-level, up 3% m/m and 52% y/y.

Following the local elections to be held in March, Turkey’s policy rate will reach its peak. The finance industry will then be welcomed in for the rate-cutting party.

Ziraat Katilim Varlik Kiralama has a B-/(EXP) rating from Fitch Ratings, one notch below Turkey’s sovereign rating and six notches below investment grade in line with local banks.

The company, a 100%-owned unit of Ziraat Katilim Bank, is an asset leasing company. Islamic bonds are sold through such asset leasing companies.

Ziraat Katilim Bank, launched in 2014 by Turkey's government-run Ziraat Bank (the largest bank in the country), is an Islamic bank. Its total assets stood at Turkish lira (TRY) 307bn ($11bn) at end-June.

There are a total of eight active Islamic banks in Turkey. Their combined assets stood at TRY 2 trillion at end-June, representing a 9% share in the Turkish banking industry.

In January, Ziraat Bank sold $500mn of eurobonds (XS2581381634) due August 2026 at a coupon rate of 9.50% and a yield to investor of 9.75% (priced at 99.273).

In October, government-run Turk Eximbank sold $500mn of eurobonds (XS2692231975) due January 2027 at a coupon rate of 9% and a yield to investor of 9.125% (priced at 99.586).

So far this year, Turkish issuers have sold a total of $13bn worth of eurobonds across 13 papers.

 

Major eurobond issues by Turkish issuers
Issuer ISIN Coupon Volume (USD mn) End of placement Maturity UST+ CDS+
Ziraat Katilim (sukuk) XS2699906512 9.375% 500 Nov 6, 2023 Nov 12, 2026 476 570
Eximbank XS2692231975 9.00% 500 Oct 25, 2023 Jan 28, 2027 341 496
We Soda (UK/Ciner) US92943TAA16 9.50% 800 Sep 28, 2023 Oct 6, 2028 488 565
Arcelik (ARCLK) XS2695038401 8.50% 400 Sep 25, 2023 Sep 25, 2028 393 467
TSKB (TSKB) XS2678232781 9.375% 300 Sep 19, 2023 Oct 19, 2028 487 550
Yapi Kredi Bank (YKBNK) XS2445343689 9.25% 500 Sep 13, 2023 Oct 16, 2028 486 550
Vakifbank (VAKBN) XS2677517497 9.00% 750 Sep 12, 2023 Oct 10, 2028 464 527
Akbank (subordinated) XS2611752317/XS2611752663/XS2611747234 9.60% 300 Jul 25, 2023 Jul 25, 2033(/28) 574 525
Treasury US900123DJ66 9.125% 2,500 Apr 13, 2023 Jul 13, 2030 597 396
Treasury US90014TAJ07 9.375% 2,250 Mar 8, 2023 Mar 14, 2029 517 393
Ziraat Bank XS2581381634 9.50% 500 Jan 25, 2023 Aug 1, 2026 566 410
Eximbank XS2395576437 9.375% 500 Jan 24, 2023 Jan 31, 2026 552 387
Treasury US900123DG28 9.375% 2,750 Jan 11, 2023 Jan 19, 2033 619 427

 

Table: Major eurobond sales by Turkish issuers.

 

In 2022, Turkish borrowers sold $12bn of eurobonds across eight tenders. The Treasury was the dominant player, raising $11bn in five tenders. It redeemed $8bn on four papers during the year.

In 2023, Turkish eurobond sellers are supposed to redeem a total of $11bn across 15 papers. In the year to date, $9bn across 13 papers has been redeemed.

On December 10, Isbank (ISCTR) is to redeem a $400mn paper (XS1003016018), which pays a 7.85% coupon.

 

Upcoming eurobond redemptions by major Turkish issuers
Issuer ISIN Coupon Volume (mn) Issuance Maturity
Isbank (ISCTR) XS1003016018 7.85% $400 Dec 10, 2013 Dec 10, 2023
Treasury US900123CR91 7.25% $2,000 Oct 23, 2018 Dec 23, 2023

 

Table: Upcoming redemptions by Turkish issuers.

 

Turkey’s finance minister Mehmet Simsek has, meanwhile, been talking about selling bonds worth $8.5bn for earthquake recovery efforts and $3bn for export credits to the UAE. It is unknown what type of papers will be sold and when.

 

Awaited eurobond auctions by major Turkish issuers
      Up to USDbn Sold Type
Nov 2, 2023 Aktifbank SPK Approval TRY0.75 - papers abroad
Oct 27, 2023 Pasha Yatirim Bankasi SPK Approval 0.025 - papers abroad
Oct 25, 2023 Ziraat Katilim Bankasi SPK Approval 0.5 Nov 6, 2023 sukuk
Oct 5, 2023 Destek Yatirim Bankasi SPK Approval 0.02 - papers abroad
Sep 28, 2023 Mersin Liman SPK Approval 0.6 - eurobond
Sep 28, 2023 Kalibre Boru SPK Approval 0.075 - papers abroad
Sep 27, 2023 TAV (TAVHL) SPK Application 0.75 - papers abroad
Sep 20, 2023 Ford Otosan (FROTO) SPK Approval €0.5 - papers abroad
Sep 14, 2023 Eximbank SPK Approval 3 Oct 25, 2023 eurobond
Sep 14, 2023 Fiba Yenilenebilir Enerji Holding SPK Approval 0.2 - papers abroad
Sep 14, 2023 Akbank (AKBNK) SPK Approval 2 - papers abroad
Sep 14, 2023 Akbank (AKBNK) SPK Approval 2 - green
Sep 11, 2023 QNB Finansbank (QNBFB) SPK Application 4 - papers abroad
Sep 11, 2023 QNB Finansbank (QNBFB) SPK Application 1 - subordinated
Sep 7, 2023 Isbank (ISCTR) SPK Approval 2 - green
Aug 31, 2023 Vakifbank SPK Approval 1 Sep 19, 2023 green
Aug 31, 2023 Nurol Holding SPK Approval 0.5 - papers abroad
Aug 28, 2023 QNB Finansbank (QNBFB) Board mandate 0.3 - subordinated
Aug 24, 2023 Garanti (GARAN) SPK Approval 2 - green
Aug 9, 2023 Destek Yatirim Bankasi SPK Approval 0.015 - papers abroad
Jul 27, 2023 Isbank (ISCTR) SPK Approval GBP 0.02 - XS2658516732, Jul 29, 2024
Jul 20, 2023 Arcelik SPK Approval 0.5 - papers abroad
Jul 19, 2023 Garanti (GARAN) GMTN Programme Renewal 6 - papers abroad
Jun 20, 2023 Garanti (GARAN) SPK Application 2 - papers abroad
Jun 20, 2023 Garanti (GARAN) SPK Application €0.75 - mortgage-backed
Jun 8, 2023 QNB Finansbank (QNBFB) SPK Approval 0.6 - papers abroad
Jun 8, 2023 QNB Finansbank (QNBFB) SPK Approval 0.1 - green
May 17, 2023 Destek Finans Faktoring SPK Approval 0.00875 May 25, 2023 papers abroad
May 11, 2023 T.T.L. Tutun Sanayi SPK Approval 0.01 - papers abroad

 

Table: Awaited eurobond sales by Turkish issuers.

 

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