Agreement has been reached by Garanti Bankasi with three foreign institutions for the issue of up to $300 million worth of Euro-commercial paper (ECP) probably towards the end of July or in early August. Banking sources say it will test perceptions of Turkish risk abroad, which has been affected by the economic crisis and credit downgrades by US rating agencies.
Citibank, NatWest Capital Markets and Union Bank of Switzerland with Garanti Bankasi’s Luxembourg branch will be the issuers and dealers in the paper. Citibank will also be the paying agent.
The minimum and maximum maturities will be seven and 365 days. The coupons have not yet been set, but yields will probably range between about 10- 20 basis points below the London interbank offered rate (Libor) for seven- day paper to around Libor plus 75-100 basis points for 365 days.
The facility is a speculative exercise, and the foreign participants will not underwrite the issue. The ECP facility will also permit Garanti to adjust the rates according to its own liquidity needs, primarily in trade financing. The bank can adjust the volume of paper issued as required, by buying back paper.
Although Garanti is not the first Turkish institution to attempt an ECP launch, it may be the first to succeed. The bank is regarded as one of the most solid in a sector rocked by the foreign exchange crisis in the first half of the year.
UBS is one of the foreign banks seeking redress from the treasury for losses arising from the closure of three small Turkish institutions in the late spring at the height of the crisis (MEED 13:5:94).
Citibank’s involvement, one of the longest-standing foreign institutions, indicates its commitment to the country. Citibank recently signed a $165 million loan to the posts, telegraphs and telephones administration enabling it to meet debt arrears to telecommunications manufacturer Alcatel-Teletas, 65 per cent owned by Belgium’s Alcatel Bell Telephone.