Industrial Development Bank of Turkey (TSKB) has obtained a $190mn worth of 367-day  syndicated loan in two tranches of $49mn and €1,304mn, according to a press release from the lender.

Story chart: Turkish corporates’ external debt rollover rates.

14 banks, including six newcomers, from eleven different countries participated in the facility while Commerzbank (Frankfurt/CBK) acted as coordinator in the deal.

Abu Dhabi Commercial Bank PJSC (Abu Dhabi/ADCB), Qatar-based Doha Bank Q.P.S.C., Bank ABC (Arab Banking Corporation/Bahrain/ABC) International Bank plc, BNP Paribas (Paris/BNP), Citibank (Citigroup/New York/C), Emirates NBD Bank PJSC, ING Bank (Amsterdam/INGA), Standard Chartered Bank (London/STAN), SMBC (Sumitomo Mitsui Banking Corporation/Tokyo/8316), Ziraat Bank Azerbaijan, Morgan Stanley (New York/MS), Erste Group Bank AG (Vienna/EBS) and Raiffeisen Bank International (Vienna/RBI) were among the other participants in the facility.

TSKB does not provide the costs of its syndicated loans, while the rollover rate stood at 155%. In July 2023, TSKB obtained a $123mn 367-day sustainability-linked syndicated loan in two tranches of $18mn and €94mn.

TSKB has a B/Positive rating from Fitch Ratings and a B1/Positive from Moody’s Investors Service.

TSKB was the last Turkish lender to renew its syndicated loans in the spring season of this year. (See the full list below).

In the spring season of 2024, eleven Turkish banks rolled a combined sum of $6bn. They obtained a total of $8bn worth of loans and the combined renewal rate came at 129%.

The costs were in line with the benchmarks set by Akbank (AKBNK), a unit of Turkish conglomerate Sabanci Holding (SAHOL), namely at the guaranteed overnight financing rate (SOFR) plus 250bp for the US dollar-tranche and at the euro interbank offered rate (Euribor) plus 225bp for the EUR-tranche.

In the spring season of 2023, the same eleven banks renewed a combined sum of $7bn at a combined rollover rate of 88% and at record-high spreads of the guaranteed overnight financing rate (SOFR) plus 4.25% for US dollar-tranches and at the euro interbank offered rate (Euribor) plus 4.00% for euro-tranches.

In the autumn season of 2023, nine Turkish banks rolled a combined sum of $4bn at a combined rollover rate of 129%. The costs fell to SOFR+350bp and Euribor+325bp.

The significant recovery in spreads is due to the U-turn to orthodoxy in economy management staged by the Erdogan regime following the general elections held in June 2023.

Central bank chart: Top 10 Turkish banks’ combined syndicated loan renewal rates and costs.

SOFR persists above the 5% level, compared with the 0.05% seen in October 2021. Twelve-month Euribor fell below the 4% level but still compares as significantly high with the minus 0.5% recorded in October 2021.

As things stand, hopes for lower benchmarks are now focused on the second half of 2024.

In June, the European Central Bank (ECB) delivered a rate cut while the Federal Reserve (Fed) has been delaying the delivery of its expected rate cut.

Turkish banks conduct 367-day (a ‘trick’ maturity for registering loans as long-term that uses two extra days) syndicated loan renewal seasons twice a year, with one season in spring (April-July) and the other in autumn (October-November).

They release identical costs, while some of the lenders, particularly smaller ones, pay higher fees. For each season, Akbank has sets the Turkey benchmark for the interest rates.

The share of syndicated loans in Turkey’s and Turkish banks’ external funding composition has declined in recent years. Turkey rolls over a combined sum of around $150-200bn each year.

Despite the lower share in the composition, the banks’ syndicated loan renewals are a good indicator for tracking developments in the sustainability of Turkey’s external debt burden.

Table: Full list of Turkish banks’ syndicated loan renewals.