Istanbul Weighs $500 Million Bond Sale to Finance Projects
Istanbul Weighs $500 Million Bond Sale to Finance Projects
(Bloomberg) -- Istanbul may sell at least $500 million of bonds to fund six metropolitan projects, people with direct knowledge of the plan said, in what would be Turkey’s first municipal debt issuance in 27 years.
The securities would have a tenor of at least five years, said the people, who asked not to be identified because the details aren’t public. The city may still decide to use other means of borrowing such as long-term export credit agency loans to complete the projects, they said.
The mayor or Turkey’s biggest city, Ekrem Imamoglu, is in London this week to meet international lenders and investors, the people said. The city hasn’t mandated any banks to advise on the plan, they said.
Imamoglu took office in June after contested elections that ended 25 years of city governance under conservative Islamists. He is having to contend with unconsolidated debt that has more than tripled since 2014. Should the city council back the plan, it would still need to be approved by the Treasury and Finance Ministry, headed by President Recep Tayyip Erdogan’s son-in-law.
Istanbul metropolitan municipality officials declined to comment.
Rare Practice
Municipal bond sales are rare in Turkey. Ankara sold five bonds between 1990 and 1992 that were denominated in German marks and Japanese yen, according to a research document on the capital markets regulator’s website. Istanbul’s attempt to sell $200 million of bonds in 2001 was scrapped when the country plunged into it’s worst-ever financial crisis.
Turkey’s biggest city tried to borrow 925 million euros ($1 billion) from international markets in 2017 to finance the six metro projects under construction at the time. It now has 16 developments either under construction or planned, according to the project log on its website.
The city budgeted to spend 6.5 billion liras ($1.1 billion) for these projects in 2019 as part of an ultimate aim to expand its rail network to 1,100 kilometers (684 miles) from 233 kilometers for its 16 million people.
The city has a B1 rating from Moody’s Investors Service, which is four notches below investment grade with a negative outlook. Fitch Ratings has the municipality at BB-, also with a negative outlook, three steps into junk and in line with Turkey’s sovereign rating.
To contact the reporter on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net
To contact the editors responsible for this story: Onur Ant at oant@bloomberg.net, ;Stefania Bianchi at sbianchi10@bloomberg.net, Vernon Wessels, Alastair Reed
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