May 17 2019

Turkey’s Garanti scales back syndicated loan, borrowing $784 million

Turkish bank Garanti borrowed the equivalent of $784 million over 367 days from international investors in a partial renewal of a syndicated loan.

The borrowing from 35 banks, in tranches of $326 million and 408.8 million euros, was partly to refinance the $457 million and 670.5 million euros it had borrowed from 38 lenders in May 2018. The bank said it got more than $1 billion of bids for this year’s borrowing.

Annual interest rates were 2.5 percent above Libor for the dollar borrowing and 2.4 percent above Euribor for the remainder. That compared with costs of 1.3 percent and 1.2 percent, respectively, a year earlier.  

Turkish banks are paying more to borrow on international markets following a currency crisis that peaked last August. The decline in the lira’s value, which has continued this year, has partially eroded banks’ capital and saddled them with more non-performing loans. Turkish firms have applied to restructure tens of billions of dollars in credit, which has become more expensive to repay.

The interest rates on the loans were the same as those secured by Turkish lender Akbank in late March and lower than equivalent borrowing by banks conducted late last year. Akbank borrowed $700 million two months ago to partially refinance $900 million, getting $950 million of bids from investors.

The transaction proved once more Garanti's strength in continuing to fund itself in the international financial markets and the confidence of investors in Turkey's banking industry, Garanti CEO Fuat Erbil said, according to Sabah newspaper. 

Turkish banks and investors including Goldman Sachs disagreed on almost all issues, including the definition of a non-performing loan, when discussing plans last week to offload banks' troubled debt into special funds, Bloomberg reported on Thursday. It wasn’t clear if further negotiations would take place, the news wire said, citing a participant it didn’t identify.