Turkish Companies Seek IPOs as Yields Soar, A1 Capital Says

Turkish companies are turning to equity markets for cheaper funds after bond yields soared, according to A1 Capital Menkul Degerler AS, which will manage four initial public offerings in the country by early 2014.

Istanbul-based A1 Capital will arrange an IPO for agriculture company Iz Hayvancilik Tarim ve Gida Sanayi ve Ticaret AS by September, and another for a car retailer later this year, deputy Chief Executive Officer Ender Sahin said in an interview. A1 Capital started operations in April, before anti-government protests helped drive the yield on Turkey’s benchmark two-year bonds to a 14-month high.

“As interest rates rise, small share offerings could generate more demand,” Sahin said from his office in Istanbul on July 29. “We could have put seven, even eight, IPOs this year in the pipeline, but we’re acting in a conservative manner.”

Turkish companies are considering IPOs after protests, which started at Gezi Park in Istanbul on May 31, drove two-year government yields up more than 3 percentage points to 9.59 percent on July 11, the highest since May 2012. The yield was at 8.94 percent at 3:24 p.m. in Istanbul. Bond sales in Turkey slumped 33 percent in June and July from a year earlier to 4.06 billion liras ($2.1 billion), according to data compiled by Bloomberg.

Iz Hayvancilik will probably start trading on Borsa Istanbul’s emerging companies market in September, Sahin said. Two chemical companies have also hired A1 Capital to arrange IPOs in early 2014, he said, declining to provide details.

IPO Pipeline

Fifteen companies in Turkey announced plans to sell shares to the public this year, up from 14 in the year-earlier period, data compiled by Bloomberg show. Eight of those, including developer Halk Gayrimenkul Yatirim Ortakligi AS, have started trading.

The Borsa Istanbul Stock Exchange National 100 Index’s 15 percent slump in the last two months is deterring some issuers. Shares of Halk GYO, which raised 250 million liras in its share sale, have dropped about 10 percent since their February debut. In early June, Turkey was forced to put an additional share sale by state-run property developer Emlak Konut Gayrimenkul Yatirim Ortakligi AS on hold amid the protests.

“Mid-sized and bigger companies will wait for the market to pick up pace again,” Sahin said.

Boosting Capital

A1 Capital started operations on April 19 after Guler Yatirim Holding AS and businessman Hilmi Hakan Derinkok bought Credit Agricole Cheuvreux Menkul Degerler AS to create the brokerage company, which also has a license to trade in currencies.

The company is in talks to acquire a stake in another portfolio manager, Sahin said, without providing details, as it seeks to meet more-rigorous capital requirements by Turkey’s Capital Markets Board. Earlier this month, the regulator raised the minimum capital money managers require by more than fourfold to 2 million liras.

Capital requirements reach 25 million liras for brokerages holding five licenses or more, such as A1 Capital, according to separate regulations. To meet the requirement, A1 will increase its capital by 8 million liras within two years, from 17 million liras now, Sahin said.

Before it's here, it's on the Bloomberg Terminal.