Iran to Libya Trade Boom Prompts Port Bond Sale: Turkey Credit

A Turkish port serving Iraq, Libya and Iran is planning to sell bonds, taking advantage of record-low interest rates to pay off debt and expand as the nation’s trade with the Middle East booms.

The Mersin port company applied to sell as much as $600 million in bonds, according to a statement to the Borsa Istanbul on May 27. The sale may lower the company’s financing costs as the average yield on Turkish corporate debt fell 135 basis points over the past year to 4.24 percent on May 24, according to JPMorgan Chase & Co. indexes. That compares with an average 5.03 percent for emerging-market companies, the data show.

Turkey’s Akfen Holding AS (AKFEN) and PSA International Pte. of Singapore own equal stakes in the port on Turkey’s Mediterranean coast, the country’s largest after Istanbul and Izmir. While trade with Europe slows, commerce with the Middle East jumped 39 percent in 2012, data from the state statistics agency showed. Mersin is the most profitable and most indebted of Akfen’s business units, according to the holding company.

“We want to improve the conditions on this debt,” Akfen Chief Executive Officer Suha Gucsar said by telephone on May 27. “We are investing in a new port on the seaside that will accept bigger vessels and we’ll use some of those proceeds for investment.”

Winning Bid

Akfen and PSA bid $755 million at a government auction in 2005 for the port, called Mersin Uluslararasi Liman Isletmeciligi AS. Mersin reported a 35 percent increase in revenue to 252.5 million liras ($136 million) last year, according to a presentation on its website. Its ratio of earnings before interest, taxes, depreciation and amortization to revenue was 60 percent, based on the report.

“Mersin port is a very profitable organization,” Isik Okte, chief strategist at Halk Invest, the investment unit for state-run Turkiye Halk Bankasi AS (HALKB), said by e-mail yesterday. “Port operations are a very lucrative business in growth areas, and volume has picked up significantly in terms of trade there.”

Genel Energy (GENL), a Turkish energy company listed in London, began trucking crude oil into the country from the Kurdistan region in northern Iraq this year, storing it at a facility in Mersin, Chief Executive Officer Tony Hayward said in January. Genel plans to complete a pipeline from the region to Turkey this year, Hayward said in April.

Oil Trade

Oil exports from the Kurdish region to Turkey may climb to 2 million barrels by 2019 from about 250,000 barrels this year, the region’s oil minister Ashti Hawrami said last month.

Mersin aims to be “the port operator of choice in the east Mediterranean” with rail and highway links to Syria, Iraq and Iran, according to a mission statement on the company’s website.

“Libya now is the top destination for exports from Mersin port, including anything from construction material to carpets and food as the country is being rebuilt,” Ali Serdar Kocaoglu, general manager of OSF International Logistics Services Foreign Trade Co. in Mersin, said by telephone on May 28. “It is so intense that ships often wait one or two days off the Libyan ports of Tripoli, Benghazi and Misrate to unload.”

Mersin had 519 million liras of debt at the end of last year, according to the group’s financial results for the 2012 fiscal year published on the company’s website on April 4. Akfen also owns airport operator TAV Havalimanlari Holding AS (TAVHL), ferries in Istanbul and property and construction companies, based on the report.

Akfen’s shares have gained 20 percent this year in Istanbul, compared with a 15 percent increase for the benchmark Borsa ISE National 100 Index.

Debt Sales

Turkish companies have sold $24.3 billion in bonds this year, almost double the $12.7 billion in the same period last year, according to data compiled by Bloomberg.

The lira weakened 0.7 percent to 1.8587 per dollar at 6 p.m. in Istanbul yesterday. The yield on two-year lira-denominated sovereign debt rose three basis points to 5.26 percent, paring the drop in the past 12 months to 419 basis points, or 4.19 percentage points, the biggest decline among major emerging markets tracked by Bloomberg.

The extra yield investors demand to hold Turkish sovereign debt in dollars over U.S. Treasuries rose four basis points to 186, compared with 197 for higher-rated Brazil and 191 for Russia, according to JPMorgan indexes. Turkey is rated Baa3, the lowest investment grade, at Moody’s Investors Service. Brazil is ranked one step higher and Russia two levels above Turkey.

Trading Partners

The European Union’s share in Turkey’s trade fell to 40.7 percent in March from 41.6 percent in the same month in 2012, according to the latest available data from the statistics agency. Exports to Germany declined to $1.15 billion, down 9.5 percent from the same a year earlier, the data show. While Germany was Turkey’s top destination for trade, Iraq ranked second with $932 million in exports.

“Turkey’s trading partners are changing and geopolitics is key,” Halk Invest’s Okte said. “The EU’s share is declining and the Middle East and Africa are gaining. As Turkey’s trading partners shift, the Mersin port will gain even more.”

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To contact the reporter on this story: Benjamin Harvey in Istanbul at bharvey11@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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