Russia and CIS Loans Roundtable 2008: Participants

So much fuss has been made of the political issues raging around Turkey in recent years that it is easy to forget its financial markets. The question of Turkish membership of the EU has received more column inches throughout Europe and Turkey than many other issues put together. More recently, the question of how far Turkey’s secular traditions should be respected has been equally explosive. Interest in the situation extends far and wide, Turkey being the country the US holds up as an example of the kind of democratic, secular but Islamic state...

The apparent resilience of volumes disguises a market that has changed dramatically in tone from a year previously. Most dramatically, with the weight of supply pushing down on capital constrained bank balance sheets, pricing has in many cases doubled. Moreover, when paying a higher price, Russian borrowers can no longer rely on a liquid market which meant last year that even the largest request for financing was filled with ease. Despite these difficulties our panel at IFR’s first Russia and CIS loan market roundtable were optimistic. Given...

Hasan Mustafa, RBS/ABN AMRO: When you talk about the volume and the supply side increasing dramatically over the last three or four months, one needs to keep in mind the fact that the bulk of that is on the short term. So these are bridges to acquisitions, they are bridges to bond issues or IPOs, which essentially means that if you divide the market between term and bridge financing then the bridges will outweigh the term side of the business. This has two implications. Firstly because these bridges are event driven, it is the borrower who is...

Hasan Mustafa: There were a couple of pre-export finance deals that were done at the end of 2007, which saw retail investors come back, but I think what Christian is saying is that retail is blocked up essentially for these bridge facilities. Even though they have higher pricing and higher yield, they just do not see why they need to take a six-month, nine-month, 12-month view. There are opportunistic buyers who will take it, but you cannot go on and invite 40 or 50 retail investors and hope that 20 will come. They would rather do a term...

The fact that we are seeing banks manage their country limits and take a portfolio approach rather than a deal-based approach a lot more today is also linked to the fact that they have become more sophisticated in the application of the risk return models. The application of Basel II requirements also means that it is easier to find a balance on a secured transaction than it is on a cheaply priced most often not unsecured deal, and it is easier to allocate a new portfolio. IFR: Is there any possibility of the secured structure being put on...

As the credit crisis stopped activity in the leveraged loan market, Turkey has seen a steady deal flow throughout 2008. That the corporate market has in part driven this flow shows how the Turkish market has changed over the past few years. The syndicated loan product is long established in Turkey but activity was long dominated by financial institutions and trade finance business. However, yields have fallen in the FI sector to the extent that clubs have replaced syndication and as a result several yield based lenders have exited the market....

The Istanbul Exchange originated as one of the most prominent associations of bankers, and was established in 1866 by the Sultan of the Turkish Empire. The present Istanbul Exchange (ISE), which was re-establihed in 1986 as a modern and electronic exchange, has achieved phonomenal growth in those 22 years, in which time more than 300 Turkish companies have raised over US$37bn. For blue chips wishing to list on ISE there must be evidence of at least three years’ operations, with the last two years showing profit. Market capitalisation of the...

Turkey has the legal and regulatory framework in place for a range of derivatives contracts to be offered, although currently the country does not enjoy a broad range of derivatives offerings when compared to Greece, the other big economy in the South East Europe (SEE) region. The use of OTC derivatives is relatively common among banks and corporates in Turkey, but demand is also less than in Greece – though significantly bigger, and with much greater potential, than in other countries in the region. Considering the level of development over...

SMEs have been causing something of a stir in Turkey as banks increasing come to view them as a new source of revenue. According to research published by the European Commission, Turkish SMEs tend to be small by European standards, with annual turnover of less than €10m, illustrating their need for capital and their potential for growth. They represent an underleveraged and underbanked sector in Turkey. Credit only became available to them relatively recently, when the tax regime imposed on SMEs was adapted. Now the sector is taking on debt...

Turkey’s 2001 banking crisis was a useful education for its financial institutions and regulator. Some claim the experience undermined its appetite for the structures blamed for those problems – and those are at the heart of the credit problems today. “Particularly after what happened in 2001, I think the market perceives a high level of regulation as a good thing,” said Caroline von Nathusius, an associate at Linklaters. She praised the Banking Regulation and Supervision Agency (BRSA) for having the flexibility to supplement its rigorous...

Turkey’s phase of mass privatisations has been driving the loans market and drawing foreign investors into the country, as FDI declines. Turkish privatisations are relatively small scale compared to deals elsewhere in Europe. But the deal flow is showing impressive resilience in the face of drying up credit lines. “The stock market has taken a knock recently and the lira is currently cheap, but many would regard this as a buying opportunity for the mid or long-term investor,” said Carline von Nathusius, associate at Linklaters. Global credit...