14th turkish oil & gas international conference ankara, 18-19 march 2015 oil & gas...

14th Turkish Oil & Gas International Conference

Ankara, 18-19 March 2015

Oil & Gas Financing: current challenges and trends

Richard Sentkar

Senior Banker Oil & Gas

2

The various players of the “oil & gas commodity chain”

… and their respective financing requirements

Producers Oil & gas producers

Transformers Refineries Petrochemicals LNG Plants

Traders Small traders Large trading companies Trading groups of large companies

Distributors Bunkering Wholesale Gas retail

Downstream MidstreamUpstream

Transportation Logistics

Each category of players needs specific set of financing products.

Financing mainly provided by banks but also by Capital Markets, Multilaterals, Funds

The mix between those sources of financing constantly adapt to the environment.

Mainly Bank Debt

Structurally highly leveraged

No fixed assets

Mostly ST financing

Capital Markets + Bank Debt

Important fixed assets (LT)

Capital intensive

LT financing for Capex

ST financing for Opex

Bank Debt + Capital Markets

Fixed assets with MT financing needs

14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015


Executive summary

3

The new strategies of banks, taking into account all the new constraints in compliance, corporate & social responsibility, solvency and liquidity ratios (Basel III)

The current oil & gas market environment with a sharp drop in crude oil prices

The geopolitical environment, leading to both constraints (sanctions) and opportunities (strategic projects)

1. Current trends and challenges are mainly determined by:

A wider diversity of sourcing, with overall good liquidity and low interest rates

The importance of institutional lenders, like multilaterals, Export Credit Agencies, Sovereign Wealth Funds

An adequate risk management policy, to protect the cash flow and the balance sheet (legal contingencies).

2. Solutions for new oil & gas financing are based on


3. Specific opportunities arise from the current environment

M&A and acquisition finance opportunities due to (1) asset disposal programs of many oil companies and (2) lower market caps of good players

Financing of state-backed strategic projects, like SCP with pipelines linked to long-term strategic needs.

Key drivers: selectivity, responsibility, liquidity

4

Key messages on banks

What is our DNA ? What should be our client base and footprint ? Centralized vs. Regional ? Big means vulnerable?

Redefinition of Corporate & Investment Banking strategy, like inter alia in BNPP, Barclays, Deutsche Bank, Credit Suisse

More strategic client driven than opportunistic deal driven

Quality of the revenues and the balance sheet is more important that size

Huge fines were a trauma, reputation and liabilities are at stake

1. International banks are redefining their overall strategies

Risks linked to compliance and CSR aspects: oil and gas sector is heavily linked to sanctions and reputation

Credit risk linked to crude oil price drop and need for restructuring of many assets, liquidity stress

2. Banks active in the oil & gas sector are challenged in their capacities to adapt

Main international banks still offer the widest range of products, but are selective in their final takes

Main banks still act as global coordinators, advisors, due to their stronger experience

Local and regional banks have a growing role in the financing of oil & gas

Multilaterals and Export Credit Agencies have a major role for compliance aspects and long-term liquidity access

Disintermediation is growing as an alternative to the banking market: debt capital market, private equity, SWF

Main consequences of points above for oil & gas financing are:


5

Key drivers and main questions addressed by banks

Main preconditions to financing

Stakeholders need to comply with international sanctions, regulations and laws. Pressure on Banks to reinforce Know Your Customer (KYC) process. What is new? bigger fines and guilty plea

Stakeholders need to care more about their image and communication

Compliance and Corporate & Social Responsibility

Intrinsic strength of the project: is the rational sound, are the assets and technical aspects economically viable over time ?

Exposure to external factors: mainly political aspects that could adversely interfere, need to anticipate market evolution

Delay in major projects have a real impact on credibility, costs and appetite from investors and financial institutions

Sustainability and viability

Even if liquidity is less of an issue than two years ago, banks need to comply with Basel III and with Liquidity Cover Ratio

Liquidity is currently good over all, with many funding sources possibilities

Banks should distribute more loans to other banks (syndication) and to non-banking sector (insurance, securitization, funds...)

Access to liquidity and loan distribution


6

Decision process usually include:

Decision Process to finance major projects

To identify the stakeholders, the main features of the project, and the project environment

To decide whether financing that project is acceptable and / ot in line with the current strategy of the bank

To determine what additional information is needed to go through the credit approval process

Screening of the project

To collect all possible factual elements on the project and on its stakeholders

To run a proprietary model

To establish a precise risk matrix, with pros and cons and mitigants

Comprehensive due diligence

To finalize the credit application

To go through different credit committees (2 minimum, 3 maximum)

Final credit approval process


7

Risk Management: why hedging ?

Hedging should be considered as an insurance to mitigate risks and makes it easier to meet economic and management objectives

Such objectives could include meeting budget targets for exporting countries, or financial ratios for companies, like EBITDA margins, Debt / EBITDA, Dividends

4 reasons to hedge: To limit impact of price volatility on company’s cash flow

To protect company against variations

To provide more predictability to company’s management and stakeholders

To lock-in margin

There could be also some “new” reason: Some banks participating in syndication or some investors ready to take part of the risk in a financing, do not want to

take the price risk fluctuation and would like deals to be hedged.

Fundamentally, these are fixed income investors (pension funds, asset managers) who are seeking stable cash flows

The lower the market risk these investors are exposed to, the better the pricing offered to borrowers


8

Tenors ranging from 3 to 5/7 years:

Pre-Export financing

RBL financing

Financing solutions primarily rely on structured debt products

Borrower at advanced stage of development: producing asset with minimum track record

Legal/political risk mitigated with production license already in place or guaranteed to be in place in a short period of time

Easy access to export routes (pre-requisite for PXF facility)

Financing documentation in foreign law

Minimum “offshorisation” requirements: including offshore collection / reserve accounts

Key factors of success

Specific approach: financing small to middle size Caspian producers


9

Banks such as BNP Paribas remains at the centre of the New Paradigm

Banks: Are better positioned to understand & manage the market risk Can offer to both borrowers and financing providers structured solutions combining lending, hedging and distribution

because they are the natural conduit between borrowers and debt investors as we have a long standing history of working with both arms.

Banks are best positioned to help both borrowers & non-traditional lenders to capture those changes and adjust their models accordingly

Can structure a transaction that maximises the chances of success – delivering the right features for the right market conditions

BNP Paribas is very well positioned to play a leading role in this change: 50 years of experience in the Commodity sector 2014 M&A Awards – Turkey Financial Adviser of the Year (Mergermarket 2014) STAR Refinery - Bond & Loans Awards Turkey 2014 (Project Finance deal of the Year, Trade & Export Deal of the Year,

Syndicated Loan of the Year) #1 Bookrunner & MLA in EMEA Syndicated Loans by volume and # of deals for upstream oil & gas (Dealogic 2014) Trade Finance Awards for Excellence 2014 – Best Export Finance Arranger (Trade Finance Magazine – June 2014) Trade Finance Deal of the Year Awards (TFM – March 2014) Energy Risk Awards – Oil & Products House of the Year (Energy Risk Magazine – June 2014) 4th Cash Management bank in the world, 3rd in Western Europe (Euromoney - July 2014) Islamic Finance News, Deals of the Year 2014 “House of the Year”, “Interest Rates House of the Year” & “Credit House of the Year” (Structured Products Europe Awards 2013) “Commodity House of the Year” & “Commodity Finance & Structured Products” (Commodity Business Awards 2013) Bank of the Year (IFR December 2012)


10

1. Appendix: EMEA and Oil & Gas loan syndication markets


11

2014 was a record year in the EMEA loan market since the crisis…

2014 loan volume in EMEA: the highest since 2007, standing at USD 1,244bn (+22% vs. 2013).

Lending activity was driven by record refinancing levels and the return of acquisition financing:

− High levels of market liquidity and strong competition between banks allowed borrowers to refinance existing debt on

better terms.

− Confidence grew among borrowers to make debt financed acquisitions, while strong bond markets gave lenders the

comfort of quick take outs through the capital markets.

Source: Dealogic Loan Analytics 2015

EMEA Syndicated Loan Volumes


12

Loan syndication market in Oil & Gas

Oil & Gas transactions remained attractive for banks as they have been in search of yield and structured transactions.

Despite a general reduction in pricing, banks generally continued to be short of assets in 2014, which was reflected in low

decline rates and large oversubscriptions on transactions.


EMEA Oil & Gas Loan Volumes

2014 showed a sustained appetite for Oil & Gas transactions…


13

... particularly in the Exploration & Production sector…

Historically, Oil & Gas loan volumes were mainly driven by deals signed in the upstream sector.

In 2014, volumes were split as followed: 48% upstream / 41% midstream / 11% downstream.


EMEA Oil & Gas Loan Volumes – Sector split



14

... and in the North Sea…

Oil & gas volume evolution is contrasted depending on geography:

Skyrocketing volumes in Northern Europe due to strong activity in the North Sea

Collapse of Russia / CIS volumes due to geopolitical reasons

Africa and the Middle East slightly behind


EMEA Oil & Gas Loan Volumes Regional Split

Loan syndication market in Oil &Gas


15

... with a strong domination of Norway

In 2014, Norwegian Oil & Gas loan volumes were multiplied by 2.5 to USD 21bn compared to 2013.

The volume uplift was particularly important in the upstream Oil & Gas sector where 9 transactions were signed including

the USD 3bn RBL secured by Det Norske to finance the acquisition of Marathon Oil Norge.


3.3x

EMEA Oil & Gas Loan Volumes 2014 Country split Norway Oil & Gas Loan Volumes Evolution



16

Loan Syndication Market in Oil & Gas: 2015 may be a more challenging year

Very early trends in January and February show an increase in volume due to stronger activity in the Midstream section

while the volume of Upstream transactions has decreased.

The drop in the oil price could make it difficult for some companies to meet covenants on existing loans and may raise

companies' borrowing costs in the global loan market.

Oil prices will be a major consideration for banks looking to lend to oil clients.

Banks will be looking closely at how it will impact certain credits and how to structure these loans so that they have the

necessary security elements and protection.

Source: Bloomberg 2015 Source: Dealogic Loan Analytics 2015

Brent Price Evolution Loan Volume Evolution


17

Loan Syndication Market: EMEA Upstream Oil & Gas League Tables

EMEA Upstream Oil & Gas – MLA League TableFY 2014

(ranked by volume)

Pos. MLA US $ m No. % share

1 BNP Paribas 5,129.23 32 10.61

2 SEB 2,613.15 13 5.41

3 DNB Markets 2,543.60 14 5.26

4 Standard Chartered Bank 2,527.45 13 5.23

5 Nordea Markets 2,091.54 6 4.33

6 Societe Generale 2,061.46 16 4.26

7 ING 2,034.36 19 4.21

8 Citi 1,889.80 10 3.91

9 HSBC 1,794.18 13 3.71

10 Natixis 1,762.98 14 3.65

11 Credit Agricole CIB 1,731.40 14 3.58

12 Mitsubishi UFJ Financial Group 1,476.04 12 3.05

13 RBS 1,338.86 8 2.77

14 FBN Holdings plc 1,230.00 3 2.54

15 Deutsche Bank 1,206.25 7 2.50

16 Sumitomo Mitsui Financial Group 1,064.88 8 2.20

17 ABN AMRO Bank 1,046.29 8 2.16

18 Ecobank Ghana Ltd 901.18 1 1.86

19 UniCredit 832.21 5 1.72

20 Bank of America Merrill Lynch 805.50 6 1.67

EMEA Upstream Oil & Gas – Bookrunner League TableFY 2014

(ranked by volume)

Pos. Bookrunner US $ m No. % share

1 BNP Paribas 3,970.97 11 16.47


3 Nordea Markets 1,758.97 4 7.29

4 SEB 1,466.96 4 6.08

5 DNB Markets 1,442.48 4 5.98

6 Citi 1,257.31 3 5.21

7 ABN AMRO Bank 1,034.55 3 4.29

8 HSBC 998.56 5 4.14

9 ING 925.74 5 3.84


11 Natixis 876.25 5 3.63

12 Scotiabank 792.31 2 3.29

13 RBS 740.00 1 3.07

14 Societe Generale 570.00 3 2.36

15 Itau BBA 566.67 1 2.35

16 Credit Agricole CIB 500.00 2 2.07

17 Rabobank 467.88 2 1.94

18 Mitsubishi UFJ Financial Group 442.31 2 1.83

18 Lloyds Banking Group 442.31 2 1.83

18 Commonwealth Bank of Australia 442.31 2 1.83

BNP Paribas was # 1 Bookrunner and Mandated Lead Arrangerin the Upstream Oil & Gas sector in EMEA for FY 2014 by volume & number of deals

Source: Dealogic Loan Analytics, 2015


18

Loan Syndication Market: EMEA Oil & Gas League Tables

EMEA Oil & Gas – MLA League TableFY 2014

(ranked by volume)

Pos. MLA US $ m No. % share

1 ING 7,382.70 49 7.33

2 BNP Paribas 7,246.79 49 7.19

3 DNB Markets 4,679.91 29 4.65

4 Nordea Markets 4,184.70 21 4.15

5 HSBC 4,171.86 28 4.14

6 Societe Generale CIB 4,164.75 28 4.13


8 Deutsche Bank 3,579.46 17 3.55

9 SEB 3,415.92 20 3.39

10 ABN AMRO Bank 3,258.39 25 3.23

11 RBS 3,097.22 14 3.07

12 UniCredit 3,038.73 15 3.02

13 Citi 2,976.05 15 2.95

14 Natixis 2,912.23 22 2.89


16 Mitsubishi UFJ Financial Group 2,671.24 23 2.65

17 Rabobank 2,237.20 15 2.22

18 Sumitomo Mitsui Financial Group 2,068.66 16 2.05

19 Lloyds Banking Group 1,923.58 10 1.91

20 FBN Holdings plc 1,556.25 4 1.54

EMEA Oil & Gas – Bookrunner League TableFY 2014

(ranked by volume)

Pos. Bookrunner US $ m No. % share

1 ING 7,366.80 23 11.60

2 BNP Paribas 5,464.66 16 8.60

3 DNB Markets 4,578.51 13 7.21

4 Nordea Markets 4,518.88 14 7.11


6 ABN AMRO Bank 2,817.96 10 4.44

7 HSBC 2,738.60 11 4.31

8 Deutsche Bank 2,731.03 9 4.30

9 RBS 2,496.13 5 3.93

10 Societe Generale CIB 2,454.53 8 3.86

11 UniCredit 1,947.96 6 3.07

12 Rabobank 1,901.19 7 2.99

13 Citi 1,777.31 5 2.80

14 SEB 1,765.28 6 2.78

15 Lloyds Banking Group 1,409.89 4 2.22


17 Natixis 1,315.69 7 2.07


19 Scotiabank 792.31 2 1.25

20 DBS 782.10 3 1.23

BNP Paribas was # 2 Bookrunner and Mandated Lead Arrangerin the Oil & Gas sector in EMEA for FY 2014 by volume

Source: Dealogic Loan Analytics, 2015


19

2. Appendix: An overview on Export Finance


Export Finance 2014 – Top ten borrowing countries

1. United States 22,923.4 26 18.4%

2. Australia 9,744.1 5 7.8%

3. Turkey 7,056.7 24 5.6%

4. Saudi Arabia 6,906.0 3 5.5%

5. Brazil 6,744.6 16 5.4%

6. UK 6,590.5 7 5.3%

7. Turkmenistan 4,897.0 4 3.9%

8. Indonesia 4,605.4 15 3.8%

9. Norway 3,491.7 14 3.6%

10.Netherlands 2,899.7 2 3.0%

Amounts in USD million, number of deals, percentage of total volumes


21

Oil & Gas value chain: ECA involvement and how BNP Paribas is positioning ?

Some landmark deals impacting the market each year

2014

38 deals have been signed for a total deal amount of USD 42Bn

• 5 biggest deals represent 56% of the market : Cameron LNG LLC (USA): USD

7.4Bn Ma'aden Waad al-Shamal

Phosphate Co (Saudi Arabia): USD 5.7Bn

FLNG Liquefaction LLC (USA): USD 4.2Bn

Star Rafineri AS (Turkey): USD 3.3Bn

Oman Refineries & Petrochemicals Co (Oman): USD 2.9Bn

BNPP Participated in 8 deals as MLA, Facility Agent or Arranger in Turkey, Norway, Brazil and Russia for a total deal amount of 14.2Bn (33%, 20.1% excluding Ma’aden)

2012

33 deals have been signed for a total deal amount of USD 44.9Bn

5 biggest deals represent 72.6% of the market :

Ichthys LNG Pty Ltd (Australia): USD 16Bn

Australia Pacific LNG Processing Pty Ltd (Australia): USD 8.5Bn

Braskem Idesa SAPI (Mexico): USD 3.9Bn

Uz-Kor Gas Chemical LLC JV (Uzbekistan) : USD 2.579Bn

Reliance Industries Ltd (India) : USD 2Bn

BNPP Participated in one deal: Archer (Norway) : USD 40M (1%) as sole MLA

2013

38 deals have been signed for a total deal amount of USD 34.2Bn

• 5 biggest deals represent 45% of the market : Nghi Son Refinery &

Petrochemical LLC (Vietnam): USD 5Bn

Sadara Chemical Co (Saudi Arabia): USD 3.9Bn

Abu Dhabi National Oil Co (UAE): USD 3Bn

Reliance Industries (India): USD 2Bn

Sevan Drilling (Norway): USD 1.75Bn

BNPP participated in 8 deals as MLA or Facility Agent in Norway, Nigeria, Saudi Arabia and Bulgaria for a total deal amount of USD 10.7Bn (31.3%, 19.6% excluding Sadara)

Source: Dealogic Analytics


22

Export Finance: Main Takeaways

O&G is one of the most CAPEX intensive industry. Almost all ECAs have a role to play in the value chain given the combination of 3 factors

Large eligibility angles: Substantial offshore contracting (equipment and services) required for developing these projects trigger eligibility under

traditional tied ECA financing scheme.

Range of contracting required expertise spread in different locations leading to consider involvement of a wide spectrum of ECAs.

Deemed strategic investment (equity) / offtake paving the way for untied ECA financing route in some projects

Lack of alternative funding options for most of projects in the context of: Tighter liquidity from commercial bank market (post-Lehman)

Bond market not able to deal with construction period

Multilaterals occasionally only (infra / pipelines mainly; PCS issues with ECAs for onshore projects) while ECA financing can be innovative in some of these large O&G projects (mini-perm Sabine pass LNG in the US, riyal tranches in Jubail, Sadara)

Limits in the risk -taking -appetite from pure private market (intrinsic risk, challenging jurisdiction)


23

3. Appendix: An overview on Debt Capital Market in Turkey


BNP Paribas – A Leading Debt Capital Markets House in TurkeyBNPP is highly active in Turkey with a range of clients across sectors and in different currencies

Bookrunner Deal value (USDm)

No. of tranches

Share (%)

1 BNP Paribas 351 3 21

2 JPMorgan 325 3 18

3 Citi 275 2 16

4 Barclays 200 2 12

4 Emirates NBD 200 2 12

6 HSBC 150 1 9

7 Deutsche Bank 100 1 6

7 Standard Chartered 100 1 6

Koç Holding A.Ş.Baa3 (Moody’s)

BBB- (S&P)Ratings Advisor

April 2013

Şişecam A.Ş.Ba1 (Moody’s)

BB+ (S&P)Ratings Advisor

April 2013May 2013

Turk TelekomBBB- (S&P)BBB- (Fitch)

Ratings Advisor

July 2014 Albaraka TürkUSD 200,000,0007.750% Due 2023

Global Coordinator

April 2013

June 2013

Garanti BankUSD 9,000,000

Due 2013Sole Bookrunner

May 2013

Şişecam A.Ş.USD 500,000,0004.250% Due 2020Joint Bookrunner

May 2013May 2013

TEBUSD 65mn Due 2023 EUR 125mn Due 2023

Sole Bookrunner

June 2013

Koç Holding A.Ş.USD 750,000,0003.500% Due 2020Joint Bookrunner

April 2013

VakifbankUSD 600,000,0007.500% due 2018Joint Bookrunner

April 2013 February 2013

Garanti BankTRY 750,000,0007.375% Due 2018Joint Bookrunner

May 2013

Türkiye İş BankasıUSD 500,000,0005.500% Due 2019Joint Bookrunner

October 2013

May 2013

Yapı Kredi Bankası USD 500,000,0005.250% Due 2018Joint Bookrunner

November 2013May 2013

Türkiye İş BankasıUSD 400,000,0007.850 % Due 2023Joint Bookrunner

December 2013May 2013

Yapı Kredi Bankası USD 5mn Due 2014CHF 10mn Due 2014KWD 10mn Due 2014

Sole Bookrunner

January 2014May 2013

Republic of TurkeyUSD 1,500,000,0006.700% due 2045 Joint Bookrunner

February 2014

Source: Bloomberg 4th February 2015

January 2013


VakifbankEUR 500,000,0003.500% due 2019Joint Bookrunner

June 2014May 2013

Turk Telekom USD 500mn due 2019USD 500mn due 2024

Joint Bookrunner

June 2014May 2013

ArçelikEUR 350,000,0003.875% due 2021Joint Bookrunner

September 2014May 2013


January 2015

24

All Corporate Turkish Bonds – 2014

Turkish Issuers For Whom BNPP has Provided Rating Advisory Service

Exceptional Exposure to Turkish Debt Capital Markets


40%

28%

28%

4%

%US Europe

UK Other

19%

19%

17%16%

23%

6%

%

Germany

France

UK

Switzerland

Rest of Eu

ME/Others

Turkey Primary Market Overview

Date Issuer Rating* Size (Mn) Maturity Coupon (%)

2015

04-Feb Turkiye Halk Bankasi Baa3/BBB- USD 500 Feb-21 4.7526-Jan Vakifbank Ba3/BB+ USD 500 10NC5 6.87515-Jan Akbank Baa3/BBB- USD 500 Jan-20 4.0007-Jan Turkey Baa3/BBB- USD 1500 Apr-43 4.8752014

18-Nov Turkey Sukuk Baa3/BBB- USD 1000 Nov-21 4.48906-Nov Global Ports B1/BB- USD 250 7NC4 8.12530-Oct Yasar Holding B2/B USD 250 6NC3 8.87523-Oct Turkiye Is Bankasi Baa3/BBB- USD 750 Apr-20 5.00021-Oct Sinai Kalkinma Bankasi Baa3/BBB- USD 350 Oct-19 5.37515-Oct Yapi Ve Kredi Bankasi Baa3/BBB USD 550 Oct-19 5.12516-Sep Turk Eximbank Baa3/BB+ USD 500 Sep-21 5.0009-Sep Arcelik BB+/BB+ EUR 350 Sep-21 3.87516-Jul Alternatifbank A/NR USD 250 Jul-19 3.12501-Jul Turkiye Garanti Bankasi Baa3/BBB- EUR 500 Jul-19 3.37526-Jun Ziraat Bank Baa3/BBB- USD 750 Jul-19 4.25024-Jun Al Baraka Turk BB/NR USD 350 Jun-19 6.25019-Jun Kuveyt Turk BBB/NR USD 500 Jun-19 5.16218-Jun Turkiye Is Bankasi Baa3/BBB USD 750 Jun-21 5.00012-Jun Turk Telekomunikasyon BB+/BBB- USD 500 Jun-24 4.87512-Jun Turk Telekomunikasyon BB+/BBB- USD 500 Jun-19 3.75010-Jun Vakifbank Baa3/BBB- EUR 500 Jun-19 3.50028-May Turkiye Halk Bankasi Baa2/BBB- USD 500 Jun-19 4.75025-Apr Finansbank Ba2/BBB- USD 500 Apr-19 6.25015-Apr Finans Katilim Bankasi NR/BBB USD 500 Apr-19 5.37510-Apr Turkiye Garanti Bankasi Baa2/BBB USD 750 Oct-19 4.75008-Apr Republic of Turkey Baa3/BBB- EUR 1000 Apr-23 4.12512-Feb Republic of Turkey Baa3/BBB- USD 1,500 Feb-45 6.62522-Jan Republic of Turkey Baa3/BBB- USD 2,500 Mar-24 5.750

2008 2009 2010 2011 2012 2013 2014 2015

0

3

6

9

12

15

18

0

5

10

15

20

25

30

35

4.0 3.8

9.0

5.3

16.4 16.4 17.1

3.0

Volume (bn, $ eqv.) LHS Nbr of Deals RHS

31%

35%

26%

8%

%US Europe

UK Other

Initial Orderbook: USD 3.1bn

Turk Telekom USD 500mn 10Y


Koç Holding USD 750mn 7Y


Turk Telekom USD 500mn 5Y Arcelik EUR 350mn 7Y

Initial Orderbook: EUR 900mn

Despite market volatility in 2014, a decent pipeline has emerged from Turkey

25

65%17%

13%5%

%US Europe

UK Other

Selected Recent Growth Markets Bond Issuance Turkish International Primary Market Historical Activity

Geographic Distribution of Recent Corporate Deals


Date Issuer Ratings Format Size (mn) Maturity Coupon

Nov-14 Global P B1/NR/BB- 144A/RegS USD 250 7NC4 8.125%

Oct-14 Yasar B2/NR/B 144A/RegS USD 250 6NC3 8.875%

Sep-14 Arcelik NR/BB+/BB+ RegS EUR 350 7Y 3.875%

Jun-14 TT NR/BB+/BBB- 144A/RegS USD 500 5Y 3.750%

Jun-14 TT NR/BB+/BBB- 144A/RegS USD 500 10Y 4.875%

Sep-13 Coca-cola Baa3/NR/BBB 144A/RegS USD 500 5Y 4.750%

Aug-13 Mersin Baa3/NR/BBB- 144A/RegS USD 450 7Y 5.875%

May-13 Sisecam Ba1/BB+/NR 144A/RegS USD 500 7Y 4.250%

Apr-13 Koc Holding

Baa3/BBB-/NR 144A/RegS USD 750 7Y 3.500%

Apr-13 Arcelik BB+/NR/BB+ 144A/RegS USD 500 10Y 5.000%

2010 2011 2012 2013 2014 2015 YTD

0

5

10

15

20

0

5

10

15

20

25

30

35

Corporates

Banks

USD bn # of tranches

Turkey Corporate Market Overview

Turkish corporate issuance is remaining steady, representing 13% of volume (USD 6.3bn) since 2012

20%

80%

%

EUR

USD43%

27%

20%

10%

%

5-6 year

7-8 year

10-year

30-year

Currency Tenor

26

Historical Turkish Issuance Activity Since 2010

Break Down of All Turkish Issuances 2014

Turkish Corporate Public Bonds Issued Since 2013


http://www.google.com.bh/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=VtN5kGUkHjBVVM&tbnid=W6WYIk1yLbiiTM:&ved=0CAUQjRw&url=http://en.cumhuriyet.com/?hn=188950&ei=5wJ5UsWAG6aM0wX1xICIAQ&bvm=bv.55980276,d.ZGU&psig=AFQjCNHIsw2510xMk34drZuOwBC2v8JPdg&ust=1383748705672414

Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15

160

180

200

220

240

260

280

300

320Turkey '20 Turkey '25

Turkey '45

MS+ bps

Trading Performance of Selected Turkish Bonds

Source: BNP Paribas,


170

195

220

245

270

295

320

345

370

395Turkey '20 Turkey '21Turkey '23 Arcelik '21Garanti '19 Vakif '19

MS+ bps


130

180

230

280

330

380

430

480

Anadolu Efes '22 Arcelik '23

Coca Cola '18 Koc '20

Sisecam '20 Turk Telekom '19

Turk Telekom '24

MS+ bps

Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15

150

175

200

225

250

275

300

325 5-Year

10-YearMid

237

185

27

USD Sovereign Midswap Spreads Corporate Midswap Spreads

EUR Turkish Midswap Spreads Sovereign CDS Spreads


1731

6170

90100

120132

168

2016 2017 2018 2019 2020 2021 2022 2023 2024

100

135

170

205

240

275

310

345

Anadolu Efes (Baa3/BBB-)

Arcelik (BB+/BB+)

Coca Cola (Baa3/BBB)

Koç Holding (Baa3/BBB-)

Mersin (Baa3/BBB-)

Şişecam (Ba1/BBB-)

Tupras (Ba1/BBB-)

Turk Telekom (BBB-/BBB-)

Turkey (Baa3/BBB-)

USD MS+ bps

28

Issuer Rating Size (Mn) Maturity Coupon

(%)Yield (%)

Spread (MS+)

Turkish Sovereign Turkey Baa3/NR/BBB- USD 2,250 Apr-18 6.750 2.802 171Turkey Baa3/NR/BBB- USD 1,500 Mar-19 7.000 3.325 192Turkey Baa3/NR/BBB- USD 2,000 Jun-20 7.000 3.482 200Turkey Baa3/NR/BBB- USD 2,000 Mar-21 5.625 3.627 203Turkey Baa3/NR/BBB- USD 2,500 Sep-22 6.250 3.859 212Turkey Baa3/NR/BBB- USD 1,500 Mar-23 3.250 3.788 201Turkey Baa3/NR/BBB- USD 2,500 Feb-24 5.750 3.901 205Turkey Baa3/NR/BBB- USD 1,500 Feb-45 6.625 4.811 253Turkey Baa3/NR/BBB- EUR 1,250 Apr-19 5.875 1.748 149Turkey Baa3/NR/BBB- EUR 2,000 May-20 5.125 2.122 178Turkey Baa3/NR/BBB- EUR 1,250 Nov-21 4.350 2.376 192Turkey Baa3/NR/BBB- EUR 1,000 Nov-23 4.125 2.572 200Turkish Corporates Anadolu Efes Baa3/BBB-/NR USD 500 Nov-22 3.375 4.867 312Arcelik NR/BB+/BB+ EUR 350 Sep-21 3.875 3.980 354Arcelik NR/BB+/BB+ USD 500 Apr-23 5.000 5.468 368Coca Cola Baa3/NR/BBB- USD 500 Oct-18 4.750 3.083 188Global Ports B1/NR/BB- USD 250 7NC4 8.125 13.359 1170Koc Holding Baa3/BBB-/NR USD 750 April-20 3.500 4.078 260Mersin Baa3/NR/BBB- USD 450 Aug-20 5.875 4.401 289Sisecam Ba1/BB+/NR USD 500 May-20 4.250 4.672 319Tupras Ba1/NR/BBB- USD 700 May-18 4.125 4.140 303Turk Telekom NR/BBB-/BBB- USD 500 Jun-19 3.750 3.569 223Turk Telekom NR/BBB-/BBB- USD 500 Jun-24 4.875 4.617 275Yasar B2/NR/B USD 250 6NC3 8.875 8.094 669Turkish Financials AkBank Baa3/NR/BBB- USD 500 Mar-18 6.500 3.531 246AkBank Baa3/NR/BBB- USD 500 Oct-22 5.000 4.613 287Garanti Bank Baa2/BB/BBB- EUR 500 Jul-19 3.375 2.878 260Garanti Bank Baa2/BB/BBB- USD 750 Oct-19 4.750 4.210 282Halk Bank Baa3/NR/BBB- USD 750 Feb-20 3.875 4.545 310Halk Bank Baa3/NR/BBB- USD 500 Feb-21 4.750 4.896 332Is Bank Baa3/NR/BBB- USD 500 Oct-18 5.000 4.219 300Is Bank Baa3/NR/BBB- USD 750 Apr-20 5.000 4.542 307VakifBank Baa3/BB+/BBB- EUR 500 Jun-19 3.500 3.167 290Vakifbank Baa3/NR/BBB- USD 500 Jan-20 4.000 4.604 317Yapi Ve Kredi Baa3/NR/BBB USD 550 Oct-19 5.125 4.584 319Yapi ve Kredi Baa2/BB/NR USD 500 Jan-20 4.000 4.604 317

Secondary Market Update

Turkish Sovereign and Corporate USD Funding Curve

Corporate Spread vs Turkish Sovereign

Turkish Secondary Market Comparables


29

2016 2017 2018 2019 2020 2021 2022 2023 2024100

135

170

205

240

275

310

345

Anadolu Efes (Baa3/BBB-)

Arcelik (BB+/BB+)

Coca Cola (Baa3/BBB)

Koç Holding (Baa3/BBB-)

Mersin (Baa3/BBB-)

Şişecam (Ba1/BBB-)

Tupras (Ba1/BBB-)

Turk Telekom (BBB-/BBB-)

Turkey (Baa3/BBB-)

USD MS+ bps




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