TURKEY: Cheaper terms entice away bond mandate

25 March 1994

Cheaper terms offered by CS First Boston (CSFB) for the country's first, $750 million-plus global issue have snatched a treasury mandate for the deal from joint lead managers Merrill Lynch and Salomon Brothers, sources close to the deal say.

However, concerns about the state of the economy and the political position of Prime Minister Tansu Ciller have prompted reservations about the deal's viability in international bond markets.

CSFB has reportedly offered to do the 10-year deal at a margin of 315 basis points over US treasuries compared with the 350 basis points for a transaction including a three-year put option proposed by the rival venture (MEED 18:3:94). The latter was eventually judged to be too expensive by the treasury.

Ciller urgently wants the deal done to use it as a vote-catcher before the impending local elections, analysts say. But there are doubts whether investors will accept CSFB's terms.

Turbulence in the bond markets together with the domestic foreign exchange crisis forced a postponement of the issue even at the put-option rates. Underwriters could be found for only $500 million worth of the bonds, bankers say.

The bond markets have since stabilised, but investors' calculations will be affected by the development of the foreign exchange crisis, the end- March local elections and the situation in the troubled southeast of the country, analysts say.

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