With Turkey's Akbank close to placing an up to $1 billion deal at press time, the country will have produced about $2 billion in DPR-backed paper since mid-May. This volume of Turkish structured paper is unusually high in such a short time frame and is particularly remarkable in light of the absence of fresh supply between last November and mid-May. One of the reasons for the mini gush is Standard & Poor's upgrade of the sovereign, sources said. While that took place in August 2004, there is a typically delayed reaction because of the structuring and due diligence involved.
"The S&P upgrade increased the monoline appetite, including XLCA's, and also increased general investor appetite," said Wynne Morriss, senior managing director at XLCA. MBIA has taken $550 million of exposure to Turkish banks over the last few weeks, while XLCA has taken $250 million.
The upcoming megadeal from Akbank - understood to be the largest cross-border, nonsovereign Turkish deal ever - has MBIA wrapping $250 million in an A class, Ambac wrapping a $250 million B class paper and XLCA wrapping $100 million in C class bonds, according to a source close to the deal. Before the S&P upgrade, structured deals out of Turkey were half-rated below investment grade, greatly restricting monoline access to the asset class.
Apart from the S&P factor, the ever-constant threat of a meaningful rise in lending rates might have pushed banks to issue now rather than a few months down the road. "Events could be making it more advantageous to lock in low rates now," said Gary Kochubka, director of structured finance ratings at S&P. And, finally, at least in the case of Turkiye Garanti Bankasi, issuance was timed to precede the French referendum on the EU constitution, according to a source close to the deal.
A veteran in the Turkish market, WestLB is leading the Akbank deal, which was slated to price last Friday. The arranger has structured a host of DPR transactions from the country. The transaction comes off a program that has issued about $1.5 billion since 1999. Apart from the $600 million in wrapped tranches, the deal includes two tranches of $50 million apiece and three tranches of $100 million each, which may be unrated, according to a source familiar with the deal. As in other Turkish DPR deals, collateral is comprised of existing and future money remittances denominated in US dollars, euros, sterling, and Swiss francs.
Prior to Akbank's deal, Turkiye Is Bankasi (Isbank) priced a $700 million, multi-tranche DPR transaction on May 26, with details surfacing after press time for that week (see table). HSBC Securities was the sole bookrunner for the Series 2005-A, -B, and -C, while ABN AMRO was the sole bookrunner for the Series 2005-D (see ASR 5/30/05).
Even though the HSBC-led series had varying maturities, they all shared the same pricing. This was reportedly a sign that the tranches ended up in conduits, said a source away from the deal. Taken as a whole, the deal went to several investors, with some dropping them into conduits, according to a source close to the transaction.
The Isbank deal signals debuts in this asset class in Turkey for both HSBC and ABN AMRO. Along with other EEMEA players, the arrangers are understood to be on the prowl for opportunities further east, in potential-rich Kazakhstan.
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