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CEE & Turkey

CASE STUDY: Turkcell Senior Unsecured Notes Gain Strong Reception with UK, EU Investors

After more than a decade long hiatus from the international capital markets, Turkcell successfully issued a US$500mn senior unsecured Eurobond that saw strong demand despite book-building against a backdrop of significant volatility in emerging markets.

Dec 7, 2016 // 11:31AM

Deal At A Glance

Deal Type: Eurobond

Deal Structure: Senior Unsecured 144A / RegS

Issuer: Turkcell İletisim Hizmetleri A.Ş. (Turkcell)

Governing Law: UK

Listing: Irish Stock Exchange

Joint Lead Managers: BNP Paribas, Citigroup, HSBC

Legal Advisors to Joint Lead Managers: Linklaters, Paksoy

Legal Advisor to Issuer: Allen & Overy, Gedik & Eraksoy

Size: US$500mn

Tenor: 10 years

Coupon: 5.75%

Reoffer price / yield:  98.509/5.95%

Spread: MS+389.5 bp

Date of Issue: 15 October 2015

Use of Proceeds: General corporate purposes and spectrum license payments

Background

On 18 September 2015, a day after the US Federal Reserve announced it would leave US interest rates untouched, Turkcell announced the commencement of a 3-day roadshow to measure appetite for a 10-year benchmark size issuance.

With market volatility spiking rapidly towards the end of the roadshow, Turkcell and the JLMs decided to pause and monitor markets for a more opportune issuing window.

On 7 October, following a brief market rally, the decision was taken to launch the book-building process for the 10-year US$500mn senior unsecured notes with initial price thoughts of 6.25%.

Transaction Breakdown

Initial price thoughts for Turkcell’s 10-year US$500mn senior unsecured notes were released to the market at 11:16AM GMT, with final price guidance being trimmed to 6.00% by 3:54PM GMT on the back of strong demand from US and European accounts.

The book size grew to US$1.9bn backed by 199 orders before settling at US$1.65bn by the time of the first pricing revision.

Strong interest in Turkcell’s bond allowed the company to tighten pricing by 50 bp throughout, with the deal pricing at 4:53PM GMT on October 7 to yield 5.75% with a final spread of MS+389.5bp. bp. Despite a long hiatus from international debt markets, the company managed to effectively price with no new issue premium. Final pricing brought the new issue premium to 9 bp inside Turkcell’s 2024 secondaries.

The notes were largely placed with American and European accounts: 42% of the bond was picked up by investors in the UK, followed by 31% being placed with accounts across Europe, 20% with US buyers, 4% with Turkish accounts and 3% being placed with Asian and Middle Eastern investors.

About 78% of the notes were placed with fund managers, 11% with banks and trusts, 6% retail investors and 5% insurance companies and long-term investors.

The issuance was Turkey’s first senior unsecured corporate bond deal of 2015 and the first corporate bond deal to hit the market following the country’s national elections in June, reopening the market for Turkish issuers.

CEE & Turkey

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