YDA bond issue

Location:

Turkey

Project number:

48603

Business sector:

Municipal and environmental infrastructure

Notice type:

Private

Environmental category:

B

Approval date:

20 Jul 2016

Status:

Complete

PSD disclosed:

25 Jul 2016

Translated version of this PSD: Turkish

Project Description

The Bank has invested TRY 70 million (EUR 21 million) in YDA Insaat Sanayi ve Ticaret A.S.'s recent TRY 250 million (EUR 74 million) local currency bond issue, which is formed of two tranches of equal sizes, with maturities of two and four years respectively. This issue was the first issuance under the company's TRY 500 million (EUR 148 million) bond programme.

Project Objectives

The investment is part of a TRY 700 million corporate bond programme 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 YDA's equity commitment under the Konya Hospital PPP project. The remaining proceeds of the bonds are expected to be used to refinance short term bank loans.

The EBRD is investing in the four-year tranche, which has the longest tenor ever issued in the Turkish local currency bond market. The four-year tranche uses the Turkish Lira Interbank Offer Rate (TRLIBOR) as its benchmark rate, which allows for effective interest rate hedging and encouraged wider investor participation. The Bank's participation is expected to assist in increasing the average tenor of bond issuances in the corporate bond market and mobilise investor interest for future bonds.

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 project's transition impact stems mainly from the following key areas which are set under the corporate bond programme:

1. Market expansion: The local currency corporate bond market has substantial potential for further improvement, particularly with regards to providing financing with longer maturities and based on floating rate indices. The market is dominated by floating issuances based on Constant Maturity Treasury Reference ('CMTR'). For the Bank's intended investment, the current issuance will use TRLIBOR as a reference rate which is expected to: (i) demonstrate the viability of an issuance of a local currency bond based on a different, and hedgeable, index other than CMTR; (ii) eliminate over time the use of non-hedgeable interest rate exposure; and (iii) encourage wider investor participation in the market, particularly international and institutional investors.

Furthermore, bond tenors are concentrated around the two year maturity and with limited three year issues since 2010. By supporting the longer tranche, the Bank will aim to demonstrate the viability of longer tenor issuances compared to the shorter maturities available in the market.

2. Demonstration effect of new ways of financing: The project aims to show the viability of local currency bond financing for a broader range of Turkish corporates. While the Turkish corporate sector is well versed in bank financing, longer tenor bond financing particularly for non-financial institutions is relatively scarce in comparison with the size and potential of the market. The current issuance will also provide longer-term investment options for institutional investors potentially broadening the investor base for the capital markets. Development of a functional and hedgeable floating rate index will also add to the attractiveness of this instrument for international investors.

Client Information

YDA INSAAT SAN. VE TIC. A.S.

YDA Insaat Sanayi ve Ticaret A.S. (YDA) is a joint stock company incorporated in Turkey. YDA and its subsidiaries' diverse portfolio encompass the following main sectors: construction, airport operations, electro mechanics, mining, medical and healthcare, agriculture, insurance and energy.

YDA is engaged in aviation via Dalaman Airport in Turkey and Aktau Airport in Kazakhstan. The company is an active player in the Turkish hospital PPP projects with its vast experience both in construction of hospital infrastructure and in facility management. Recently awarded PPP projects include Dalaman Airport and the integrated health campuses of Kayseri, Konya, Manisa and Sanliurfa.

EBRD Finance Summary

TRY 70,000,000.00

Total Project Cost

TRY 250,000,000.00

Environmental and Social Summary

Categorised B (ESP 2014). The environmental and social (E&S) issues associated with YDA's current issuance are expected to be limited. Previous Environmental and Social Due Diligence (ESDD) conducted for the Konya Hospital PPP has shown that the company has in place the necessary provisions and capacities to develop and operate the project in line with the Bank's requirements. The project is at an early stage of construction and the company will be required to report to the Bank on the E&S performance of the project and progress made against the already agreed Environmental and Social Action Plan (ESAP). Furthermore, a lenders' consultant has been engaged to ensure that the Bank's requirements are met during project construction. Under the previous company's bond issue, the Bank's due diligence further confirmed that at a corporate level the company has in place various management systems, procedures and capacities to appropriately manage the impacts and risks associated with its activities. These systems are certified to international standards including ISO 14001, OHSAS 18001 and ISO 9001. The most recent annual report for the previous bond project confirmed that the company is progressively improving its approach to managing E&S issues on its projects and satisfactorily implementing the ESAP. A new ESAP is not required for the current issuance but the company will be required to continue to implement existing ESAPs and report on its E&S performance to the Bank on an annual basis.

Non –Technical Summary for the Konya Hospital PPP: EnglishTurkish

Konya Hospital PPP PSD

Technical Cooperation

None.

Company Contact Information

Cumhur Inan Bilen
cumhur.bilen@yda.com.tr
+903124594400
+903124368279
www.yda.com.tr
Vedat Dalokay Cad. No:112, Çankaya/Ankara

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

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Tel: +44 20 7338 7168
Email: projectenquiries@ebrd.com

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