Translated version of this PSD: Turkish
Extension of the Turkish Lira Corporate Bond Framework by an additional TRY 1.2 billion for investments in unsecured and secured local currency corporate bond debt instruments with maturities not less than two years issued by Turkish corporates (excluding banks and non-bank financial institutions) in Turkey.
The extension builds on the TRY 700 million Turkish Lira Corporate Bond Framework approved in December 2015 with the goal to facilitate the development of the local currency corporate bond market in Turkey and support longer tenor fixed and floating rate issuances. To date, the Bank has invested TRY 658 million in eight transactions including Infrastructure, Energy and ICA clients. These investments are complemented by TRY 1,332 million from other investors. The outstanding headroom under the original Framework will be fully utilised in 2018Q1, once the last issuance already approved by EBRD is realized and EBRD successfully subscribes to the issuance.
The primary purpose of the extension will be the successful placements of local currency bonds to support Turkish corporates diversify their funding sources by encouraging them to tap into the local currency corporate bond market. The Bank's participation will send a strong signal to private participants in the market as well as international investors on the sustainability of local currency corporate bonds in Turkey.
The extension will also enhance liquidity through secondary market trading and support the use of a new hedgeable benchmark rate that is developed with the support of the Turkish authorities. The extension will continue to help Turkish corporates to reduce the foreign currency (FX) risk on their balance sheets by replacing some of their FX loans with local currency bonds.
The framework and its extension support the expansion and deepening of Turkey's local currency corporate bond market and encourage wider international investor participation in the market by raising standards in terms of transparency, disclosure and rating; and by promoting a functional and hedgeable floating rate index in the market.
The extension's transition impact stems from the following two transition qualities:
Resilience: The extension will contribute to economic resilience by increasing the average tenor of bonds in which the EBRD participates and the average tenor of the local currency corporate bond market which both generate benefits for issuer and investor. It will also seek the opportunity to improve the secondary market by actively trading the bonds in which the Bank will invest. Once there is secondary market activity, additional liquidity will be created and this will improve the resilience of the market.
Well-governed: The extension will support the governance quality through enhanced disclosure standards and improved corporate practices.
The extension will be available for Turkish corporates in Turkey. Bonds will be issued by banks and non-bank financial institutions (e.g. factoring, leasing companies) are not eligible under the extension. The framework will not concentrate on a specific set of corporates (i.e. by size, business activity and sector) but may be available for various sectors and from small-size to medium and large-sized companies. Depending on the nature of the business and the uses of the funds, sub-projects can be considered under MEI, Transport, Power & Energy, Natural Resources, Agribusiness, Manufacturing & Services, or Property & Tourism sectors.
EBRD Finance Summary
Total Project Cost
Environmental and Social Summary
The extension itself is not categorised but rather each sub-project will be categorised on a case by case basis. Sub-projects categorised as 'A' are likely to be difficult to be financed with bond proceeds because the nature of capital market transactions, particularly in terms of timing. This may prevent these projects from fully complying with the Bank's Environmental and Social (E&S) Policy and the Public Information Policy, specifically the need for an Environmental and Social Impact Assessment (ESIA) to be disclosed for 60 days prior to Board consideration.
The E&S due diligence for each sub-project will be determined on the basis of the specific use of proceeds, especially where this involves investment projects. Capital market transaction rules may apply to some sub-projects and in these cases ESDD may be restricted to relying on publicly available information, the prospectus/offering circular and that supplied by potential clients. In these cases, the Bank may not be able to undertake sub-project specific due diligence in accordance with the E&S Policy. s. Framework agreements and/or E&S Action Plans will need to be agreed with the respective bond issuers to structure the sub-projects in line with the Bank's requirements. Where this is not possible, derogation from the E&S Policy for such a sub-project may need to be sought from the Board. The E&S performance of each sub-project will need to be reported to the Bank on an annual basis.
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