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DCM: Turkey bonds sink in secondary market

Liability management can be a double-edged sword. Get it right and everyone showers you with plaudits about your relative sophistication as a borrower and how attentive you are to addressing investors’ wants and needs. Get it wrong, however, and your name is quickly mud and the world and his fund manager wife are soon griping about how naive you are and how difficult it will be for you to achieve your funding target for the year if you carry on in a such a cavalier, market-unfriendly manner.

The Republic of Turkey, with $6 billion or so to raise in the international bond markets in 2007 – by far the largest amount of any sovereign in the emerging Europe, Middle East and Africa region – could clearly have done with a good start to its funding programme.

In recent years, the borrower has done exactly that. In January 2006, for example, it launched a well-received $1.5 billion 2036 bond via Citigroup and Deutsche Bank – its longest-ever dollar bond at the time – attracting $6 billion of orders. The success of that one issue did much to enable it to return to the markets later in the year with a series of new issues and taps of existing transactions so that it could meet its $5.5 billion target for the year.

When Turkey launched a tap of its 2036 issue in January this year, alongside an add-on to a previous 2016 offering, the market reaction could scarcely have been more different. Having looked to get off to a flying start, the borrower crashed and burnt. Initially targeting a total fundraising in the $1.5 billion to $2 billion region, Turkey was forced to trim its sails when foreign investors in particular sat firmly on their hands when it came calling.

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