www.bne.eu - Ankara is finally set to help open the way for Turkish banks and
companies to access Islamic funding by issuing a debut sukuk sovereign
bond, according to reports. The move is partly motivated by recent
difficulties investors have met in raising funds to take part in
infrastructure projects and privatisations.
According to Reuters, which cites unnamed banking sources
speaking on July 5, Turkey is set to mandate HSBC, Citi and Deutsche
Bank to manage the sale of its first sukuk. The issue would set a
benchmark for Turkish borrowers looking to tap a global sukuk market
estimated at more than $100bn, allowing the Muslim, but secular, economy
to diversify its fixed income investor base.
(source)
The newswire reports one source saying a $1bn issue is in the
pipeline, although a final decision on the size of the issue is unclear.
"The Treasury is about to finalise meetings about its first sukuk
issue, and their choice (for the mandate) will be HSBC, Citi and
Deutsche," said one senior banking source in London.
As the crisis in Western financial markets persists, Turkish
borrowers have found it tricky to find financing. A lack of funding has
been blamed for Ankara's difficulties in attracting investors for
infrastructure projects such as the beleaguered North Marmara Project to
build a Third Bosphoros Bridge and surrounding highways, whilst recent
failed attempts to sell off state companies have been blamed on similar
difficulties.
Deputy Prime Minister Ali Babacan has been predicting a sukuk
sovereign issue since early in the year, and has overseen work to put
the necessary legislation into place for several Islamic financial
instruments. "We find [developing the sukuk market] important in terms
of the diversification of financial sources and investment options for
both national and international investors," Babacan told reporters in
April. "Market conditions will determine the amount of the issue, and
the sukuk may be lira-, dollar- or euro-denominated and will attract
investors from both Turkey and abroad."
The deputy PM added that the sovereign issue is also intended to
encourage Turkish companies to tap funding from Muslim investors, many
of them cash rich thanks to booming oil prices. "The Treasury's sukuk
issues will pave the way for those of the private sector," he said.
He also insisted that that deepening the sukuk market is important
for Istanbul's bid to become an international financial centre. "We
think it will not be only a national market, but a regional and global
market. These certificates will be traded on the Istanbul Stock Exchange
every day," he claimed.
Despite espousing Islamic values, Turkish Prime Minister Tayyip
Erdogan's government has shied away from launching a sukuk issue before,
fearing that it would offer ammunition to critics who accuse his ruling
AK Party of seeking to roll back state secularism by stealth. However,
tight liquidity and lending conditions, and the current risk aversion in
Western markets, makes Islamic financing more and more tempting,
despite a likely "sukuk premium" of as much as 1 percentage point,
according to some analysts.
Source: - July 6, 2012
