The treasury’s $500 million general purpose loan was signed by attornies on behalf of a syndication of 18 international and domestic banks in London on 26 April. The deal is the first such balance of payments borrowing in more than a year of absence from the international markets during the country’s economic crisis. Disbursement of the loan was expected on 28 April.

The treasury sought the three-year transaction with an average life of two years to restore the credit-worthiness of Turkish risk in the international markets. The nominal interest is 1.75 per cent over the London interbank offered rate (Libor), but the all-in cost of 3.45 per cent, which includes large fees, is expensive, compared with pricing prior to the crisis, according to Istanbul banking sources.

The deal is divided into two portions, a conventional Euroloan valued at $245 million, and a $255 million floating rate note (FRN) facility, for which agents respectively are Chase Manhattan Bank and Citibank. Equal participants in the overall deal are Bank of Tokyo, Chase, Chemical Bank, Citibank, Commerzbank, Fuji Bank, J P Morgan & Company, Sakura Bank, Sanwa Bank, Sumitomo Bank, UBS, Morgan Stanley, Nomura, Yamaichi, and Goldman Sachs, and the three domestic institutions, Is Bankasi, Halk Bankasi and Vakiflar Bankasi.

Although the treasury is ostensibly the arranger, Chase, Citibank and J P Morgan orchestrated its structure and pricing, say the sources. The institutions all have a close relationship with Turkey.

Turkey’s economy faces a debt servicing bill of around $11.5 billion this year. However, the treasury will wait on market developments before launching another borrowing for the $1,500 million-2,000 million it requires in new financing for its own external debt-servicing bill in 1995 of between $6,500 million-7,000 million.

Following the loan, the international markets appear to be opening up again, the bankers add. State-owned Vakiflar Bankasi hoped to sign a $30 million, one-year loan arranged by Citibank before the national Kurban Bayram holiday beginning 9 May.

For pre-export financing, it will carry an all-in cost interest rate of around 1.6 per cent over Libor, and a nominal interest spread of about 1.45 per cent . All-in costs below 1.25 per cent could have been expected by Vakiflar prior to the crisis, when Turkish risk was in high demand, say the bankers.

However, this is a prestige deal, and rates can be expected to fall for further short-term financings, they add. But rates will stay at around 3.5 per cent above Libor for loans over two years for some time, they say.