South Korean JV Gets $960 Million Loan for Istanbul Tunnel

A joint venture group led by South Korean contractors got a $960 million loan to help finance a subsea road tunnel in Istanbul.

The 18-year deal, signed in Ankara today, is the longest for a project financing in Turkey, according to Sule Kilic, deputy general manager at UniCredit SpA (UCG)’s Turkish unit, which helped arrange the transaction.

The $1.3 billion project, incorporating a 14.6-kilometer (9.1-mile) road with a 5.4-kilometer stretch of tunnel under the Bosporus strait’s sea bed, will ease car traffic on two suspension bridges joining the city’s European and Asian sides serving more than 12 million people in Turkey’s biggest city. About 120,000 vehicles will travel through the road daily.

South Korea’s SK Holdings Co. (003600)’s SKEC, Kukdong Engineering & Construction Co., Samwhan Corp. (000360), Hanshin Construction Co. (004960) together with Turkey’s Yapi Merkezi won the government contract in 2008 to build the roads and the tunnel.

The group set up a joint venture called Avrasya Tuneli Isletme Insaat & Yatirim AS, or Atas, in 2010 to implement the project and operate the tunnel for 26 years, according to the project’s website. The construction is expected to be completed by 2017, Kilic said.

Borrowing Costs

Atas is the borrower in the transaction, Yapi Merkezi said in an e-mailed statement. Interest rates on the loan, made up of several tranches, vary between 225 basis points and 350 basis points over benchmark rates, said Murat Dedeoglu, an executive from DK Dedeoglu Kocar, which acted as financial adviser to the Istanbul-based builder.

The transaction will benefit being underwritten by the Turkish Treasury, Yapi Merkezi said.

Lenders for the project include European Investment Bank, European Bank for Reconstruction & Development, Sumitomo Mitsui Banking Corp., Mizuho Corporate Bank, Standard Chartered Plc (STAN), Yapi & Kredi Bankasi AS (YKBNK), Turkiye Garanti Bankasi AS (GARAN), Turkiye Is Bankasi AS (ISCTR), and Export Import Bank of Korea, also known as Kexim, Kilic said. EIB and Kexim each provided more than one- third of the loan, she said. Deutsche Bank AG (DBK) acted as hedging bank in the transaction, Yapi Merkezi said.

To contact the reporter on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net.

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net.

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