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CASE STUDY: A Green Step Forward for Turkish FIs - TSKB

As the first green bond to be issued by a Turkish FI, Turkiye Sinai Kalkinma Bankasi’s (TSKB) US$300mn 5-year notes saw tremendous demand from accounts Europe and Asia, helping to set the benchmark for other Turkish issuers looking to raise capital for sustainable projects.

Nov 11, 2016 // 10:47AM

Deal At A Glance

Deal Type: Green Bond

Deal Structure: RegS

Issuer: Turkiye Sinai Kalkinma Bankasi (TSKB)

Governing Law: UK

Listing: Irish Stock Exchange

Global Coordinators: BNP Paribas, Citigroup,  HSBC,  Standard   Chartered

Bookrunners: Commerzbank, ING Bank, UniCredit

Legal Advisors to Global Coordinators, Bookrunners: Allen & Overy, Gedik & Eraksoy

Legal Advisor to Issuer: Linklaters, Paksoy

Size: US$300mn

Tenor: 5 years

Coupon: 4.875%

Reoffer price / yield: 99.244   /5.048%

Spread: MS+387.5 bp

Date of Issue: 12 May 2016

Use of Proceeds: To fund a portfolio of green  /  sustainable projects

Background

TSKB held roadshows in London and Frankfurt on 9 and 10 May 2016, respectively, in a bid to take advantage of positive market conditions and issue its first green bond.

On 12 May 2016 TSKB successfully issued a US$300mn 5-year green bond off the back of strong demand from both green and conventional investors.

Transaction Breakdown

TSKB’s inaugural green bond saw strong demand from European and offshore US   accounts, and   generated   a strong orderbook totalling close to US$3.6bn – an oversubscription rate of 13X – by the time it issued in the early afternoon of 12 May 2016.

Initial price thoughts (IPT), released at 8:32AM GMT on 12 May, and stood at MS + 450 bp, which tightened substantially over the course of the day as the orderbook grew. Price guidance was first revised at 10:37AM GMT to MS+425 bp (+/- 12.5 bp) after the note generated orders of close to US$2.4bn.

By 11:40AM GMT, price guidance was revised to MS+400-412.5 bp, and by the time the transaction launched (1:12PM GMT) price tightened further to MS+387.5, resulting in an overall compression of 62.5 bp.

Distribution on the note was well-diversified and saw heavy participation from European accounts. About 44% of orders were placed with investors in the UK, 14% in Switzerland, and 10% in Germany, and 15% in other European countries, with the remaining 17% being placed in offshore US and Middle Eastern accounts.

In terms of investor type, asset managers took the lead, placing 38% of orders, followed by private and public banks (30%), supranationals (17%), hedge funds (11%), and other investors (4%). Additionally, the notes captured significant interest from conventional and green investors, which accounted for 65% and 35% of orders respectively.

As the first green bond to be issued by a Turkish FI, the deal helped open up the country’s market by setting a benchmark for others looking to fund green and sustainability projects.

Middle East CEE & Turkey Sustainable Finance

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