Turkiye’s Ziraat Katilim sells $500 million 3-year debut sukuk paper at 9.375% coupon

Ziraat Katilim Varlik Kiralama has sold $500mn of a debut sukuk paper (XS2699906512) due November 2026 at a coupon rate of 9.375% (priced at 99.996), the lender said on November 3.

Dubai Islamic Bank (Dubai/DIB), Emirates NBD Capital Limited, HSBC (London/HSBA) and Standard Chartered Bank (London/STAN) acted as intermediaries in the deal.

In October 2022, in the last sukuk sale by a Turkish issuer abroad, the Treasury sold $2.5bn of three-year papers at a coupon rate of 9.758% and a yield to investor of 9.75%.

Looking at the global markets, there is no turbulence of note impacting sentiment. The US Treasury yields, which were sailing through the 6%s across the curve, are currently taking a breather around the 5%-level.

The USD Index (DXY) fell into the 105s after pushing through the 107-level,still up from the 99s seen in July.

As a result, Turkiye’s five-year credit default swaps (CDS) have once again fallen below the 400-level in parallel with EM peers, while the yield on the Turkish government’s 10-year eurobonds has declined below the 9%-level.

The USD/TRY rate is, meanwhile, still heading north. On September 21, the pair once again broke through the horizontal barrier set at the 27.00-level. The latest record high, registered on November 3, is 28.5666.

The Turkish government’s ‘five/10 kurus (Turkish cents, pronounced as kurush) devaluation per day policy’ in the struggle to stop the slide is still in place. As of November 3, the latest daily trench was dug around the 28.40-level, up 3% m/m and 52% y/y.

Following the local elections to be held in March, Turkiye’s policy rate will reach its peak. The finance industry will then be welcomed in for the rate-cutting party.

Ziraat Katilim Varlik Kiralama has a B-/(EXP) rating from Fitch Ratings, one notch below Turkiye’s sovereign rating and six notches below investment grade in line with local banks.

The company, a 100%-owned unit of Ziraat Katilim Bank, is an asset leasing company. Islamic bonds are sold through such asset leasing companies.

Ziraat Katilim Bank, launched in 2014 by Turkiye’s government-run Ziraat Bank (the largest bank in the country), is an Islamic bank. Its total assets stood at Turkish lira (TRY) 307bn ($11bn) at end-June.

There are a total of eight active Islamic banks in Turkiye. Their combined assets stood at TRY 2 trillion at end-June, representing a 9% share in the Turkish banking industry.

In January, Ziraat Bank sold $500mn of eurobonds (XS2581381634) due August 2026 at a coupon rate of 9.50% and a yield to investor of 9.75% (priced at 99.273).

In October, government-run Turk Eximbank sold $500mn of eurobonds (XS2692231975) due January 2027 at a coupon rate of 9% and a yield to investor of 9.125% (priced at 99.586).

So far this year, Turkish issuers have sold a total of $13bn worth of eurobonds across 13 papers.

In 2022, Turkish borrowers sold $12bn of eurobonds across eight tenders. The Treasury was the dominant player, raising $11bn in five tenders. It redeemed $8bn on four papers during the year.

In 2023, Turkish eurobond sellers are supposed to redeem a total of $11bn across 15 papers. In the year to date, $9bn across 13 papers has been redeemed.

On December 10, Isbank (ISCTR) is to redeem a $400mn paper (XS1003016018), which pays a 7.85% coupon.

Turkiye’s finance minister Mehmet Simsek has, meanwhile, been talking about selling bonds worth $8.5bn for earthquake recovery efforts and $3bn for export credits to the UAE. It is unknown what type of papers will be sold and when.

Source: intellinews

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