The lazy, hazy days of summer didn't fully envelop residents of the DPR world. They weren't exactly lazy, when a handful of DPR deals either closed or ramped up in a market so grim that any cross-border closing is an event. But 'hazy' isn't so far off the mark, as players hid details as best they could.
Turkiye Garanti Bankasi originated a deal where the involved parties let in some light, though pricing stayed in the dark. Barclays Capital led the Ä200 million, 10-year transaction sold entirely to the European Investment Bank (EIB), a multilateral that entered the sector of diversified payment rights only a few weeks earlier. Garanti was following in the still-fresh footsteps of Turkish peer Akbank, which closed a $393 million transaction via WestLB.
While pricing was undisclosed for both deals, sources familiar with the market said the spread was probably far tighter than what they could get in the market. Just what market investors would pay is somewhat mythical at this point, as the number varies depending on whom you ask. A couple of bankers made a stab of close to 400 basis points over.
One of the reasons the EIB has snapped up two Turkish DPR deals in the span of a month - and will potentially do more, according to one banker - is that it finally hit on a way to lend to Turkish banks, which, as non-investment grade entities, can't receive direct unsecured funding from the lender, according to a source in the structured finance division of Garanti.
"We had signed other framework agreements [with the EIB] but we weren't able to draw down from them, due to other factors. One of them was the rating situation," the source said. A DPR transaction - rated 'Baa2' by Moody's Investors Service, was the solution.
EIB's key aim in this business is to funnel money to SMEs in Turkey. Both Akbank and Garanti have agreed to use the proceeds of their respective deals to lend to this sector.
Unless a multilateral's involved, Turkish banks will probably stay out of DPRs for some time. The exception could be Garanti, which is looking into doing a private placement. But that would likely be the extent of it.
The picture's a little different in Latin America.
Banco Santander closed its second DPR deal this year on Aug. 27, a $300 million deal with a six-year final. Fitch Ratings and Moody's rated the deal 'A' and 'A3,' respectively, placing it a few notches above the DPR trades out of Turkey.
Led by Bank of Tokyo-Mitsubishi UFJ, the deal priced at 80 basis points over Libor, and naturally was taken on the arranger's balance sheet, according to a source close to the deal.
That's the kind of pricing that upsets bankers who are pushing for the return of market investors. "There'll be benchmarks where anyone will look around and say, 'actually this doesn't make any sense,'" said one such banker.
Other than its exceptional terms, the deal was a standard DPR from Santander, which placed a $190 million 4(2) private placement in May, and a $400 million deal in 2004.
Finally, Banco Internacional del Peru (Interbank) is reportedly in the market with a $100 million, seven-year DPR deal via Nomura Securities. Rated 'BBB' by Standard & Poor's, the deal follows up on an earlier transaction that Credit Suisse led for a total of $200 million. That deal - the originator's first in the DPR space - was understood to have either been a bilateral private placement or taken on the bank's balance sheet. Pricing was unavailable.
It's unclear at this point what Nomura will do with its Interbank trade. One thing's sure: taking a first-timer to the market these days could be a dangerous thing.
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