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Capital Markets

Turkey looks to diversify infrastructure debt

The country’s banks will not be able to shoulder the debt burden of its planned infrastructure programme. But palatable alternatives that don’t involve government guarantees aren’t yet ready, so for the foreseeable future, debt refinancing of projects is confined to after construction.

Capital ratio constraints have kept foreign banks out of the Turkish infrastructure boom since 2008 for anything other than ECA or multilateral guaranteed projects. But the Turkish government is making great efforts to pull them back in and diversify the country’s infrastructure funding options for what is a vastly ambitious investment programme designed to double Turkey’s $820 billion economy in the next decade.

Some international project lenders still have a footprint in Turkey. UniCredit owns 50% of Yapi Kredi and maintains a presence in its own right. ING and Société Générale also remain in the local market, and Sberbank is present via Deniz Bank, which it bought from Dexia in 2012.

In addition, foreign project lenders have been peddling the concept of miniperms to the Turkish project market, but with little success. Sponsors are unwilling to take on the refinancing risk, probably a wise move given the volatility of Turkish lira, project income streams and that project borrowing is normally in euros or dollars.

Of the foreign lenders still on the ground, only UniCredit, primarily through Yapi, and Sberbank are active lenders for projects that do not come with heavy ECA or multilateral backing, or internationally recognised project sponsors with solid creditworthiness.

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