Fees have escalated for the first borrowing guaranteed by the government since the recent foreign exchange crisis. This is a $30 million, two-year facility mandated by Istanbul municipality on 10 February to underwriters Sumitomo Bank, Chemical Bank, Fuji Bank and the local Is Bankasi.

The all-in costs are 140 basis points above the London interbank offered rate (Libor). This is high compared with the 110-120 basis points all- in cost being charged before the crisis for similar deals, bankers say.

The municipality requested that the deal should be completed within a week. To accommodate this, the underwriters were to supply the funds themselves, and then sell the deal down at the end of the first one-month interest rate period. The three foreign banks will retain $5 million each, and Is Bankasi will retain $3 million. It is likely the municipality will subsequently request more normal six-monthly interest payment periods, bankers say.