TRY Corporate Bond Framework Extension

Location:

Turkey

Project number:

49882

Business sector:

Municipal and environmental infrastructure

Notice type:

Private

Target board date:

18 Jul 2018

Status:

Passed Final Review, Pending Board Approval

PSD disclosed:

29 Jan 2018

Translated version of this PSD: Turkish

Project Description

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 and a maximum of 6 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 2018, once the last issuance already
approved by EBRD is realized and EBRD successfully subscribes to the issuance.

Project Objectives

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 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.

Transition Impact

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 to deepen Turkey's local currency corporate bond market by promoting a functional and hedgeable floating rate index in the market.
     
  • Well-governed: The extension will support the governance quality through enhanced disclosure standards and improved corporate practices.

Client Information

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

TRY 1,200,000,000.00

Total Project Cost

TRY 6,000,000,000.00

Environmental and Social Summary

The Framework, and its Extension, are not categorised but rather each sub-project will be categorised on a case by case basis. No sub-projects categorised as 'A' can be financed with bond proceeds because the nature of capital market transactions, particularly in terms of timing, prevents these projects from fully complying with the Bank's Environmental and Social (E&S) Policy and the Public Information Policy, specifically the need for Environmental and Social Impact Assessments (ESIA) and the disclosure thereof 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 public issuance sub-projects and in these cases ESDD will 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 and a derogation from fully complying with the E&S Policy may need to be sought from the Board. 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, a derogation from the E&S Policy may also need to be sought. The E&S performance of each sub-project will need to be reported to the Bank on an annual basis. ESD will work with the respective OL to identify potential GET elements on sub-projects.

Technical Cooperation

The Bank is in the process to assist Capital Markets Board to review and enhance the regulations
related to bond defaults and their resolution through a TC. The assignment will analyse gaps in
the existing legislation in comparison to international best practice and recommend changes to the
current legislation. The estimated cost of the assignment is EUR 74,000, to be financed by the SSF.

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

EBRD project enquiries not related to procurement:
Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

Public Information Policy (PIP)

The PIP sets out how the EBRD discloses information and consults with its stakeholders so as to promote better awareness and understanding of its strategies, policies and operations. Please visit the Public Information Policy page below to find out how to request a Public Sector Board Report.
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.