Investment promotes longer tenor in corporate bonds, a rare feature for Turkish market
The European Bank for Reconstruction and Development (EBRD) is investing in the three-year fixed coupon tranche of the Turkish lira-denominated bond issue of Ekim Turizm Ticaret A.S. - Turkey’s number one car leasing company operating under the brand name Intercity.
The Bank is investing 20 million Turkish lira (TL) alongside FMO, the Dutch development bank, and other investors, in the TL 61 million Turkish lira bonds. The issuance is structured in two tranches: a three-year TL 43.5 million tranche and a two-year floating coupon tranche of TRY 17.5 million with participation of local investors. It is the second issuance under Intercity’s TL 200 million bond programme.
The EBRD’s purchase of bonds brings more qualified investors in the Turkish lira bond issue with a longer tenor and fixed coupon, rare features for the Turkish bond market.
Proceeds of the financing will enable Intercity to expand its car lease portfolio to SMEs, a sector where leasing penetration remains low.
Jean-Patrick Marquet, EBRD Director for Turkey, said: “As we continue working with this strong market player, we believe that this bond issuance will help diversify Intercity’s funding base and improve financial risk management. It is also part of our efforts to develop capital markets in Turkey, one of the EBRD’s key priorities in the country. In addition, we are pleased that the financing will enable Intercity to expand its reach to small businesses as car leasing can be a lifeline for SMEs.”
Through investments in the bond markets, the EBRD seeks to demonstrate the benefits of capital market financing to Turkish companies and acts as a catalyst for international investors.
Frederik Kummersteiner, FMO Director Infrastructure, Manufacturing & Services, added: “FMO has a longstanding relationship with Intercity as lender and former shareholder. Through our participation in the Turkish lira-denominated bond we can further support the company by increasing its access and visibility in the Turkish capital market. Fixed coupon local currency bonds with longer tenor are still relatively scarce, but have a positive impact on managing both interest and currency risks and will therefore contribute to Intercity becoming an even stronger player in the car leasing market.”
Intercity enjoys about 15 per cent share of the car leasing market in Turkey. With more than 35,000 vehicles in its fleet, purchased directly from carmakers, it leases them to corporate clients with one- to three-year contracts, and provides comprehensive nationwide service, including periodic maintenance, repairs, insurance, replacement cars, and 24/7 roadside assistance. The company employs over 410 people.
The EBRD has previously provided a €20 million loan to Intercity, as part of a syndicated financing of €77.5 million led by the Royal Bank of Scotland.
In 2014, Turkey became EBRD’s top financing destination, with new investments worth €1.4 billion. The Bank started investing in the country in 2009 and currently operates from offices in Istanbul, Ankara and Gaziantep.
To date, the Bank has invested €6.8 billion in Turkey through 170 projects in infrastructure, energy, agribusiness, industry and finance. It has also mobilised about €16 billion for these ventures from other sources of financing.