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Russia Inspires Akbank Pitching Lira Debt to U.S.: Turkey Credit

January 30, 2013

Akbank TAS (AKBNK), a Turkish lender part- owned by Citigroup Inc., took advantage of foreign appetite for the nation’s assets by selling the first lira bonds overseas, counting on central bank monetary policy to limit currency risk.

The Istanbul-based bank was said to sell five-year lira debt abroad priced to yield 7.5 percent yesterday after pitches to investors in the U.S., Europe and Asia, according to a person with knowledge of the deal, who asked not to be identified as the information hasn’t been published. That compares with a rate of 7 percent for three-year ruble bonds sold last week by higher-rated OAO Sberbank, Russia’s largest lender, its first local-currency issue to international investors.

Turkish central bank Governor Erdem Basci’s policies helped send the lira’s volatility to the lowest level since at least 1987 this month. Foreign investors bought more than $24 billion in Turkish stocks and bonds in the past year, helping drive the yield on benchmark two-year lira notes down 361 basis points to 5.83 percent yesterday.

The sale “is a chance for us to invest in an investment- grade name with nice pick-up over the government,” according to Dmitri Barinov, who said he was buying the securities to add to about $2.4 billion in emerging European debt at Union Investment Privatfonds in Frankfurt. Akbank “may have looked north at Russia and got excited that so many Russian bonds in rubles are easily absorbed by foreigners,” he said by e-mail yesterday.

‘Very Attractive’

Akbank is rated Baa2, the second-lowest investment-grade ranking, at Moody’s Investors Service, with an equivalent BBB at Fitch Ratings. That’s two levels above Turkish sovereign debt at Moody’s and one step higher than Fitch’s ranking for the government.

At 7.5 percent, Akbank’s bonds would yield 123 basis points higher than Turkish debt maturing in 2017, which yielded 6.27 percent at 5 p.m. in Istanbul yesterday.

“Even when taking into account the liquidity and corporate premiums, I can say it’s attractive,” Kaan Nazli, a senior economist at ING Investment Management Europe in The Hague, said by e-mail yesterday.

Paring Gains

The lira fell less than 0.1 percent against the dollar to 1.7683 at 7:30 p.m. in Istanbul yesterday, leaving it 0.9 percent stronger this year. Two-year yields rose one basis point, paring the biggest drop among major emerging markets over the past 12 months.

Basci has used an interest-rate corridor since October 2011 that allows him to vary borrowing rates daily to control capital flows and defend the lira. Three-month volatility on the Turkish currency fell five basis points to 4.60 percent yesterday, compared with a low of 4.42 percent on Jan. 15 and down from 14.4 percent at the start of last year, according to data compiled by Bloomberg on 23 emerging markets.

The extra yield investors demand to own Turkish debt rather than U.S. Treasuries fell three basis points to 166 yesterday, compared with the emerging-market average of 254, according to JPMorgan Chase & Co.’s EMBI Global Index.

Default Risk

Turkey’s five-year credit-default swaps rose seven basis points to 131 basis points yesterday, compared with 144 for Russia and 173 for South Africa. The contracts pay the buyer face value in exchange for the underlying securities or cash if a borrower fails to adhere to its debt agreements. Rising prices show deteriorating perceptions of a borrower’s creditworthiness.

Other banks will probably follow Akbank in selling lira- denominated debt abroad, according to Mariya Gancheva, a credit analyst at Mitsubishi UFJ Securities in London.

Turkiye Garanti Bankasi AS, Turkey’s biggest lender, applied to sell as much as $3 billion in bonds abroad, saying they may be in equivalent foreign currencies or in liras, according to a statement to the Istanbul Stock Exchange yesterday.

The Akbank sale “is a first of its kind, which gives investors a good opportunity to get involved in the name through different instruments with different return dynamics,” Gancheva said by e-mail yesterday. “It’s likely to be followed.”

To contact the reporter on this story: Benjamin Harvey in Istanbul at

To contact the editor responsible for this story: Gavin Serkin at; Claudia Maedler at

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