Ronesans Bond

Location:

Turkey

Project number:

47840

Business sector:

Municipal and environmental infrastructure

Notice type:

Private

Environmental category:

B

Target board date:

09 Dec 2015

Status:

Signed

PSD disclosed:

29 Jan 2016

Project Description

The Bank has invested 100 million (EUR 31 million equivalent) in Ronesans Holding A.S. recent TRY 200 million (EUR 61 million equivalent) bond issue. This issue is part of Ronesans TRY 500 million bond programme, of which TRY 335 million has been placed to date. The most recent issue had a tenor of three years.

Project Objectives

The investment is part of a TRY 700 million Corporate Bond Framework ("Framework") designed by the Bank to support Turkish corporates in tapping the bond market.

The proceeds from the Bank's participation are envisaged to go towards Ronesans' equity commitment under the Elazig Hospital PPP project and refinancing a portion of the existing bonds.

The remaining proceeds of the bonds are expected to be used to support other recently awarded healthcare PPP projects.

Transition Impact

The EBRD's investment is in line with the objectives of its Local Currency and Local Capital Market Development Initiative to promote the development of capital markets in countries where it invests.

The transition impact of the Project will be derived from three main sources under the TRY Bond Framework:

1. Market expansion: The local currency corporate bond market has substantial potential for further development in two key areas: longer maturities and floating rate indices. The bond market is currently dominated by floating issuances based on the Constant Maturity Treasury Reference ('CMTR'). For the Bank's intended investment, the aim is to use TRLibor as a benchmark rate, which is expected to demonstrate:

(i) the successful issuance of a local currency bond based on a different hedgeable index other than CMTR; (ii) eliminating non-hedgeable interest rate exposure;

(iii) encouraging wider investor participation in the market, particularly international and institutional investors.

Currently corporate bond tenors are concentrated around two year maturities, with limited three year issues since 2010. By supporting a three year tranche, the Bank aims to demonstrate the viability of longer tenor issuances compared to the shorter maturities available in the market.

2. Setting standards for corporate governance and business conduct: Rönesans agreed to adopt higher disclosure requirements which are targeting disclosure similar the public issuances (as set out under Framework), including inter alia:

(i) preparation of a company presentation which includes detailed information substantially similar to that of public issuances;

(ii) obtaining a credit ratingwhich will be updated and published periodically; and

(iii) publishing semi-annual financial statements.

Furthermore, the Project will support improvements in Ronesans¿ corporate governance standards.

The Holding will implement a Corporate Governance Action based on best practices, which is expected to have a strong demonstration effect on similar firms in the Turkish market, encouraging them to improve their standards.

3. Demonstration effect of new ways of financing: The successful placement contributes to:

(i) the development of local currency capital markets in Turkey via the expected inclusion of other institutional investors, including one or two portfolio management companies;

(ii) the demonstration of new ways of financing by encouraging companies and other conglomerates to diversify their sources of funding through access to local currency bond markets.

Client Information

RONESANS HOLDING

Ronesans Holding A.S. ('Ronesans' or 'Issuer' or 'Company') is a joint stock company incorporated in Turkey. Rönesans is a diversified conglomerate/holding based company with activities in construction, real estate and energy founded in 1993. It operates in Turkey, Russia and various other developing countries in the CIS and MENA regions. Rönesans has started to engage in social infrastructure sector and formed a joint venture with Meridiam Infrastructure Fund to construct and maintain 6 PPP healthcare campus projects reaching a capacity of 9,500 beds.

EBRD Finance Summary

TRY 100,000,000.00

Total Project Cost

TRY 200,000,000.00

Environmental and Social Summary

Categorised B (2014 ESP). This is a sub-project under the Framework for the Bank's participation in Ronesans' bond issue to rationalise its balance sheet and to finance its equity commitments in the Elazig Hospital PPP project. As Elazig Hospital is subject to another EBRD transaction currently under preparation, the environmental and social due diligence ('ESDD') focused on review of and update of corporate environmental and social systems of Rönesans, organisation overseeing the operations, setting policies and guidelines for a group of companies active in construction, real estate development, energy and healthcare investments. The ESDD concluded that, Ronesans has established a robust E&S Management system, which trickles down to its subsidiaries responsible for delivery of individual infrastructure projects and has the relevant environmental and social risk management capacities at the Company, group and subsidiaries' levels. The Companys' subsidiaries are certified in accordance with ISO 14001, OHSAS 1800 and ISO 9001 standards. The majority of its development projects are financed by IFIs and are assessed in line with international environmental and social requirements. Subsidiaries employ reputable contractors in line with
centralised policy and the Company's Environmental, Health and Safety ('EHS') requirements are standardised for all tender documentation. Suppliers and contractors are regularly monitored and inspected for compliance with legal and Holding EHS policies and Code of Conduct. Grievance mechanism for public and contractors workforce is established for individual projects. ESDD identified the need for regular reporting on any project grievances via subsidiaries to the Company Board level, which is reflected in the ESAP agreed with the Company.

Technical Cooperation

None.

Company Contact Information

Erdem Kurumsak; Emre Baki; Selin Öner; Emre Burak Yilmaz
erdem.kurumsak@ronesans.com; emre.baki@ronesans.com; selin.oner@ronesans.com;
burak.yilmaz@ronesans.com
+90 312 441 3141

Business opportunities

For business opportunities or procurement, contact the client company.

For state-sector projects, visit EBRD Procurement: Tel: +44 20 7338 6794
Email: procurement@ebrd.com

General enquiries

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Text of the PIP

Project Complaint Mechanism (PCM)

The Project Complaint Mechanism (PCM) is the EBRD's accountability mechanism. It provides an opportunity for an independent review of complaints from individuals and organisations concerning EBRD-financed projects which are alleged to have caused, or are likely to cause, environmental and/or social harm.

Please visit the Project Complaint Mechanism page to find information about how to submit a complaint. The PCM Officer (pcm@ebrd.com) is available to answer any questions you may have regarding the submission of a complaint and criteria for registration and eligibility, in accordance with the PCM Rules of Procedure.