Turkey Wealth Fund plans debut bond sale via HSBC, ICBC, Citigroup

Turkey’s sovereign wealth fund mandated HSBC, the Industrial Commercial Bank of China and Citigroup for a debut Eurobond sale, Bloomberg reported on Wednesday.

The sale will most likely take place this year, but the exact timing and size of the transaction will depend on market conditions, the news wire said, citing people with direct knowledge of the matter. The fund and the banks declined to comment, it said.

The government is looking to make the Turkey Wealth Fund a centrepiece of the country’s economic growth strategy through investments in strategic domestic industries. The fund has already bought a controlling interest in Turkcell, Turkey’s biggest mobile phone operator, a 10 percent stake in the Istanbul Stock Exchange and is helping to pay for the construction of a finance centre in Istanbul.

The fund is chaired by President Recep Tayyip Erdoğan. It also controls companies including Turkey’s biggest state-run banks and Turkish Airlines. The government has used the banks to flood the economy with cheap lending this year to help stimulate a recovery.

The sale of the bonds would follow the fund’s securing of a two-year syndicated loan in 2019 of 1 billion euros ($1.17 billion). HSBC, ICBC and Citigroup were also involved in that deal.

Investors have in the past questioned why they should buy debt from the fund when Treasury bonds were available. But the Treasury and Finance Ministry has refrained from conducting regular sales of sovereign debt abroad, instead electing to sell foreign currency paper domestically, providing the potential opening for the fund’s transaction.

Erdoğan’s political opponents including the main opposition Republican People’s Party (CHP) heavily criticised the fund’s establishment in August 2016, saying it was a means for the governing Justice and Development Party (AKP) to manage state assets away from parliamentary oversight. Erdoğan became chairman in September 2018, shortly after winning re-election with vastly enhanced executive powers.

The firms under the fund’s control were previously overseen by the Treasury and their accounts were examined by legislators.

Most leading sovereign wealth funds around the world have been established to invest a country’s oil and natural gas revenues in assets abroad. Turkey imports nearly all the energy it consumes.