The Turkey Wealth Fund is moving forward with its intentions to launch its first international bond offering, presenting a test for investor interest in the country’s assets following the recent departure of its central bank chief known for market-friendly policies, reported Adam Samson of FT.
Financial institutions engaged by the Turkey Wealth Fund have commenced promoting a bond denominated in US dollars to potential investors this week, with order-taking starting on Wednesday, as indicated by documents reviewed by the Financial Times. The fund aims to raise approximately $500 million.
Despite the recent upheaval at the central bank, both local and foreign analysts have largely remained unfazed, speculating that Erkan’s successor, deputy governor Fatih Karahan, will maintain the strategy of employing high borrowing costs as the primary tool to combat an inflation rate nearing 65 per cent.
According to a source familiar with the TWF transaction, Erkan’s resignation has helped alleviate uncertainty surrounding the leadership of the central bank, following weeks of speculation in local media regarding allegations of her father’s unofficial involvement at the bank and subsequent dismissal of an employee, which Erkan refuted.
The five-year TWF bonds were offered with a yield of approximately 9.125 per cent, as per a term sheet. This contrasts with the yield of about 7.6 per cent for a Turkish sovereign dollar bond maturing in March 2029.
Established in 2016, the TWF holds stakes in a diverse range of Turkish companies, as well as infrastructure and real estate assets, including Turkish Airlines, major banks, and Borsa Istanbul, the country’s stock exchange. Additionally, the fund fully owns prominent assets such as energy group Botaş, national postal company PTT, and a significant port near Izmir.
Analysts generally anticipate that new CBRT chief Karahan will uphold the current stance of tighter monetary policy.
Goldman Sachs economist Clemens Grafe remarked, “Unlike past instances, Erkan’s resignation does not seem to stem from any disagreement between the political leadership and the central bank.” This alludes to previous episodes where Erdoğan, who once famously labeled high interest rates as the “mother and father of all evil,” dismissed governors for implementing rate hikes.
“We have confidence that [Karahan] will continue along a similar trajectory as his predecessor,” Grafe commented. JPMorgan economists also informed clients that Karahan, a former economist at the New York Federal Reserve, is “likely to maintain a tight monetary policy for an extended period.”
BBVA, JPMorgan, and Standard Chartered are acting as joint global coordinators and bookrunners for the TWF deal, while Bank of America, Emirates NBD Capital, ICBC, ING, QNB Capital, and Société Générale are serving as bookrunners.