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Turkey Wealth Fund Hires HSBC, Citi, ICBC for Debut Eurobond

HSBC, ICBC, Citi Hired for Turkish Wealth Fund’s Debut Eurobond

Turkey’s sovereign wealth fund mandated international banks including HSBC Holdings Plc, Industrial Commercial Bank of China Ltd. and Citigroup Inc. for its debut Eurobond sale, according to people with direct knowledge of the matter.

The exact timing and size of the issuance will be determined by market conditions, the people said, asking not to be identified as the plans haven’t yet been made public. The sale is more likely to take place sometime before the end of the year, one of the people said.

Bank of America-Merrill Lynch also got a mandate for the issuance, another said.

The fund, known as TWF, as well as ICBC, Citi, HSBC Turkey and Merrill Lynch declined to comment.

The fund, established in 2016, aims to play a leading role in making investments too big for the private sector, while attracting foreign investment and expanding the size of Turkey’s markets, its Chief Executive Officer Zafer Sonmez told Bloomberg in July.

Earlier this year, Bloomberg reported that the fund could raise about $2 billion with the Eurobond sale. The mandate comes after a string of purchases by the wealth fund, such as its acquisition of a 26.2% stake in Turkey’s biggest mobile-phone operator, Turkcell and a 10% stake in Borsa Istanbul.

Investor demand for the debt may be hindered by rising inflation and a widening current-account deficit. Turkey is also coming off the back of a credit boom, partly aimed at containing the economic fallout of the coronavirus pandemic. Geopolitical risks and upcoming U.S. elections are also weighing on investor sentiment toward riskier markets, with the lira losing 23% against the dollar this year.

“If we’re in a period of risk aversion -- with all the concerns about U.S.-China relations, not to mention the U.S. political pantomime in November -- then Turkey won’t be flavor of the month,” said Nigel Rendell, a senior analyst at Medley Global Advisors LLC in London. “In such circumstances, there’s no way that Turkey could issue a Eurobond at a sensible yield. Even if market conditions are more favorable, investors are cautious of the economics and politics in Turkey.”

To improve investors’ appetite for Turkish assets, the government is easing some of the measures and regulations that have hurt sentiment.

A “charm offensive” campaign in recent weeks aimed at introducing more orthodox monetary policy measures and regulations, “could lift sentiment moderately,” said Manik Narain, a strategist at UBS Group AG in London. “This may be quite secondary though to the uncertainties around the U.S. election.”

If completed, the bond sale would follow a two-year syndicated loan of 1 billion euros ($1.17 billion) in 2019. ICBC and Citigroup acted as book-runners on the loan, while HSBC was the credit representative.

©2020 Bloomberg L.P.