Turkish Wealth Fund Clinched Loan in Final Days of Agbal Era

Turkey’s sovereign wealth fund pulled off one more deal in the closing days before President Recep Tayyip Erdogan jolted investors by ousting the central bank’s governor.

The fund, known as TWF, borrowed 1.25 billion euros ($1.5 billion) from international banks to roll over a two-year loan from 2019, according to a statement on Wednesday. It paid a margin of 225 basis points over Euribor, a quarter point less than the cost of the original 1 billion-euro loan.

TWF said the transaction closed on March 22, when the previous loan matured. But all the negotiations were carried out and completed last week, according to people familiar with the matter, just before Erdogan’s decision to fire Naci Agbal as central bank governor in the early morning hours Saturday.

Turkish Wealth Fund Clinched Loan in Final Days of Agbal Era

Even before turmoil gripped Turkey’s markets this week, plans to refinance the fund’s only syndicated loan were shaping up as a test of investor sentiment after a shakeup at the top of the institution. Erdogan removed Zafer Sonmez, its former CEO, earlier this month and named Arda Ermut in his place.

“Syndicated loans are done through relationship banking, so rolling over isn’t a problem in general,” Cagdas Dogan, a banking analyst at BGC Parterns in Istanbul, said by email. “Agreeing on a deal this week would have meant securing it at a higher cost.”

High-Level Shakeup

The personnel moves deepened an overhaul at Turkey’s top economic institutions that started with the resignation of Hakan Atilla, the head of Istanbul’s stock exchange, and culminated with Agbal’s shock departure. A fresh bout of market turbulence followed Erdogan’s sacking of his third central bank governor in less than two years, marking an end to a period of policy orthodoxy that had briefly restored the lira’s fortunes.

Turkey established its sovereign fund in 2016 and mandated it to play a leading role in making investments that are too big for the private sector.

Industrial & Commercial Bank of China Ltd. was the lead book-runner and joint coordinator. Citigroup Inc. acted as the bookrunner and joint coordinator in the deal, which saw demand of 1.4 billion euros from 14 lenders in 11 countries, the fund said in the statement to Bloomberg. HSBC Holdings Plc was the facility agent.

Other lenders in the deal included Arab Banking Corporation, Emirates NBD, ING Groep NV, Intesa Sanpaolo SpA, JPMorgan Chase & Co., Qatar National Bank and Sumitomo Mitsui Banking Corporation, Banco Bilbao Vizcaya Argentaria, Bank of America, Barclays Plc and Societe Generale SA in different roles.

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