Turkey raises $1.5 billion with 5-year dollar bond

ISTANBUL/LONDON, Nov 8 (Reuters) – Turkey raised $1.5
billion in its latest dollar-denominated international bond sale
that offers investors a 10% yield for a five-year bond,
defying a difficult backdrop for lower-rated issuers.

The latest bond issue which is set to mature in 2028
attracted some $5 billion of bids and brings Ankara’s fund
raising on international capital markets to $9 billion out of
the target of $11 billion for 2022.

Foreign investor exposure to Turkey has dwindled in
recent years as the country’s unorthodox monetary policy of
cutting interest rates despite soaring inflation and a tumbling
lira has rattled markets.

“The new issue came cheap to the existing bonds,” said
Viktor Szabo at asset management firm abrdn.

“Turkey had to offer a decent concession to come to the
market despite issuing a relatively short maturity bond.”

Turkey’s international bonds are yielding below the 10%
mark across the curve.

The geographical breakdown in the statement by the
finance ministry on Tuesday showed one third of the new bond was
sold to U.S. investors, another 27% to Turkey-based ones while
those in the UK and elsewhere in Europe snapped up 22% and 10%
respectively.

While Turkey, unlike many of its single-B rated peers,
did manage to tap international capital markets, analysts were
still sceptical on the outlook.

“The biggest challenge is that they have a significant
amount of repayments next year,” said Kaan Nazli at asset
managers Neuberger Berman, adding Turkey faced repayments next
year of $18.8 billion and 3.8 billion euros in hard-currency
loans and bonds, including domestic hard-currency issues.

“No matter what the global backdrop is, it will be a
very challenging year for them.”

The Treasury and Finance Ministry said on Monday it mandated
Bank of America Merrill Lynch, Goldman Sachs and
JPMorgan for the eurobond issue as part of its 2022
foreign financing programme.

The Treasury borrowed $10 billion from international capital
markets last year.
(Reporting by Nevzat Devranoglu in Istanbul and Karin
Strohecker in London
Writing by Daren Butler;
Editing by Jonathan Spicer and Chris Reese)