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Busier-Than-Heathrow Ambition Spurs Turkey’s Biggest Loan

Denizbank AS Chief Executive Officer Hakan Ates. Photographer: Ian Waldie/Bloomberg
Denizbank AS Chief Executive Officer Hakan Ates. Photographer: Ian Waldie/Bloomberg

June 19 (Bloomberg) -- Banks are buying into Turkey’s ambition to create one of the world’s busiest aviation hubs as they prepare to finance the country’s largest corporate loan.

Five Turkish companies contracted to build Istanbul’s third airport are going to banks for about 4.5 billion euros ($6.1 billion), Denizbank AS Chief Executive Officer Hakan Ates said by phone on June 17. That’s 28 percent larger than the next-biggest loan by a Turkish company, taken out by Ojer Telekomunikasyon AS in 2013, and compares with $750 million borrowed last year by Dubai Duty Free to extend Dubai International Airport, according to data compiled by Bloomberg.

Corporate finance is flowing in Turkey as the lira stabilizes and government borrowing costs decline amid an alleviation of political tension since regional elections in March. The nation is investing in aviation infrastructure to support Turkish Airlines as it builds a long-haul business to compete with European rivals. The call for funds comes as Turkey faces heightened geopolitical risks from neighboring Iraq.

“For any country, the success of a project of this size provides an important benchmark for investors looking into future investments,” Simon Quijano-Evans, the head of emerging-market research at Commerzbank AG in London, said by e-mail yesterday.

Dubai Competition

The loan package will probably come from about 10 Turkish banks, including three state lenders, and will finance the first phase of the airport, Ates said. Istanbul’s third airport will eventually have six runways and capacity for 150 million passengers a year, according to the Ankara-based State Airports Authority.

London’s Heathrow is the world’s third-largest airport, behind Beijing and Atlanta, carrying 72 million travelers on its two runways in 2013, data from Airports Council International show. Traffic through Turkey’s Ataturk grew 14 percent last year, climbing to 18th with 51 million, while in Dubai it surged 15 percent to 66 million.

If the loan deal is secured, “it will signal that banks are willing to finance big-ticket investments again,” Ozgur Altug, chief economist at BGC Parters in Istanbul, said yesterday by e-mail.

Commercial banks will provide most of the loan and export-credit agencies may fund about 20 percent, three people with knowledge of the plan said on June 16. The debt may have an average tenor of 15 years or 16 years, with a four-year grace period to cover the construction period, and financing may close this year, said one of the people, who asked not to be named because the plan is confidential.

Iraq Insurgency

“The consortium is having one-on-one talks with banks,” Ates said. “We are checking whether we should participate. The terms are not clear yet.”

An executive at the joint-venture company building the project, IGA Havalimani Isletmesi AS, declined to comment when contacted by phone on June 16. An executive at Limak Insaat Sanayi Ve Ticaret AS, which also has a 40 percent stake at Istanbul’s second airport Sabiha Gokcen, declined to comment on the terms of financing or which banks it’s in talks with when reached by phone the same day.

Two-year note yields have fallen by more than 3 percentage points since reaching an almost five-year high of 11.60 percent on March 24. The lira has strengthened 3 percent against the dollar since the March 30 elections. It weakened 0.1 percent by 4:07 p.m. in Istanbul, trimming its year-to-date gain to 1 percent.

‘Victory’ Moment

Turkish assets fell last week after two of the nation’s diplomats were taken hostage by Sunni militia in Iraq amid an Islamist insurgency. Violence has since escalated with Iraqi forces yesterday battling for control of the country’s largest oil refinery.

The builders had a ground-breaking ceremony June 7 at the airport site, where Recep Tayyip Erdogan called the project “a monument of victory.”

“Investors exposed to Turkey know that there always has been a geopolitical risk element in any investments, but the general view is that in the medium term, Turkey is at the economic forefront when the situation calms down again,” Commerzbank’s Quijano-Evans said.

To contact the reporters on this story: Ercan Ersoy in Istanbul at eersoy@bloomberg.net; Isobel Finkel in Istanbul at ifinkel1@bloomberg.net; Stephen Morris in London at smorris39@bloomberg.net

To contact the editors responsible for this story: Benedikt Kammel at bkammel@bloomberg.net; Daniel Tilles at dtilles@bloomberg.net Matthew Brown, Daliah Merzaban

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