Akbank Launches Turkey’s Fall Syndicated Loan Renewal Season for Peers at Record Costs

Akbank (AKBNK), the large-cap unit of the Turkish conglomerate Sabanci Holding (SAHOL), obtained a syndicated loan of 367 days in two tranches $225 million and 178 million euros, said the lender October 26.

Story chart: turnover ratio of syndicated loans and cost of syndicated loans.

The cost of the USD tranche was the secured overnight funding rate (SOFR) plus 425 basis points. The cost of the EUR tranche was the Euro interbank offered rate (Euribor) plus 400bp.

The exchange rate-adjusted renewal rate was very low at 60%, while spreads reached record highs.

Benchmarks are extremely high at the moment as SOFR broke above the 3% level, compared to the 0.05% seen in October 2021while the 12-month Euribor fluctuates around 2.70%, against the minus 0.5% recorded in October 2021.

Recently, all benchmarks have risen alongside the global trend of monetary tightening.

In October 2021, Akbank obtained a syndicated loan of 367 days in two tranches $460 million and €207 million. The USD tranche cost was 35 basis points lower than Libor +2.15% and the EUR tranche cost was 50 basis points lower at Libor +1.75% compared to Libor +2.50% and Euribor +2.25% observed in October 2020 (see full list below).

In June 2023, SOFR is to replace the current London Interbank Offered Reference Rate (Libor) in USD. The one-year Libor is currently over 5%.

Turkish banks hold 367-day syndicated loan renewal seasons – a “trick” deadline to register long-term loans using two extra days – twice a year, with a season in the spring (April-May) and l another in the fall (October-November).

During the last years, Akbank (AKBNK) fixed the Turkey benchmark for interest rates each season.

In April this year, the government-run Ziraat Bank kicked off the spring season. In July, Industrial Development Bank of Turkey (TSKB) concluded the spring season.

The spring season lasted from April to July. Eleven banks renewed $8 billion value of loans at a combined renewal rate of 92% with borrowings at $7 billion in total.

The costs of the USD tranches were the secured overnight funding rate (SOFR) plus 275 basis points. The EUR tranche costs were Euribor + 210bp. In spring 2021, the costs amounted to Libor + 2.50% and Euribor + 2.25%.

In the just-launched autumn season, nine Turkish banks will renew a combined sum of $6 billion. In autumn 2021, nine Turkish banks renewed approximately $6 billion syndicated credit facilities at a combined renewal rate of 102%.

In August of this year, rumors Turkey suggested that local banks did not want to roll over their foreign currency debt at current costs as the government pressured them to guarantee at least an 80% rollover rate.

Akbank started the season with a very low renewal rate. Whether from Akbank peers follow his path, it will mean around $2-3 billion value of capital outflows. It wouldn’t matter to Turkey. Government-run banks could opt for higher renewal rates.

As is, Turkey does not have high hopes when it comes to attracting funding from the financial industry. Therefore, unfavorable loan renewals are hardly a surprise. The government has sought out currency inflows from “friendly” countries, while the channel for unidentified capital flows has been working overtime recently.

Given the situation regarding the widely questioned reliability of Turkey’s official macroeconomic data releases, syndicated loan renewals are a good indicator to monitor the sustainability of Turkey’s external debt burden. Akbank did not provide a good signal, although a systemic fault is still not visible on the charts.

Table: Complete list of syndicated loan renewals of Turkish banks.

©2022 bne IntelliNews , source Magazine