TRY Corporate Bond Framework

Location:

Turkey

Project number:

47371

Business sector:

Municipal and environmental infrastructure

Notice type:

Private

Approval date:

09 Dec 2015

Status:

Approved

PSD disclosed:

23 Oct 2015

Sub-projects signed under this framework

Translated version of this PSD: Turkish

Project Description

The Bank is considering the Turkish lira Corporate Bond Framework (Framework) to facilitate the development of the local currency corporate bond market in Turkey and support longer-tenor fixed and floating rate issuances. By providing a strong demonstration effect, it is expected to expand the universe of domestic investors, extend the average tenor of bonds (currently the average maturity of issuances is two years); and support first time issuers in the market.

The framework will be invested 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.

Project Objectives

Successful placement of local currency bonds under the framework will help 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 medium term local currency bonds in Turkey.

The framework will also help Turkish corporates to reduce the FX risk on their balance sheets by replacing some of their FX loans with local currency bonds.

Transition Impact

The transition impact of the framework will be derived from three main sources:

1. Demonstration effects of new ways of financing. The framework aims to demonstrate the viability of the local currency bond financing for a broader range of Turkish corporates. While the Turkish corporate sector is well versed in bank financing, bond financing, particularly for smaller corporates and with long tenors are relatively scarce in comparison with the size and potential of the market. The bonds will also provide long-term investment options for institutional investors
thereby broadening the investor base for the capital markets.

2. Market expansion. The local currency corporate bond market has substantial potential for further development particularly with respect to providing finance for longer maturities and hedgeable floating rate indices development. There is also very limited liquidity in the market in terms of trading volume which could be helped by the expansion of the presently limited investor base as well as increased disclosure requirements.

3. Standards for governance and corporate behaviour. While currently there are basic requirements for disclosure for local currency bond issues, there is room for improvement towards international standards. The local currency corporate bond issues supported as part of this framework will aim to increase secondary market activity as higher levels of disclosure will encourage more investors to enter the market.

Client Information

The framework will be available for local currency bonds issued by Turkish corporates (excluding banks and non-bank financial institutions, e.g. factoring, leasing companies). 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 various companies (from mid-size to large caps, from public companies to private companies).

EBRD Finance Summary

TRY 700,000,000.00

Total Project Cost

TRY 3,100,000,000.00

Environmental and Social Summary

The framework 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, may prevent these projects from fully complying with the Bank's Environmental and Social Policy and the Public Information Policy, specifically the need for an Environmental and Social Impact Assessment to be disclosed for 60 days prior to consideration by the board of directors.

The environmental and social due diligence (ESDD) for each sub-project will be determined on the basis of the specific use of proceeds, especially where this involves investment projects. Environmental and Social Action Plans will need to be agreed with the respective bond issuers to structure the sub-projects in line with the Bank's performance requirements. The environmental and social performance of each sub-project will need to be reported to the Bank on an annual basis.

Technical Cooperation

None.

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.

Share this page: