Turkey was one of 2018’s biggest emerging market underperformers after the lira bottomed out last summer. But market sentiment toward the country has rebounded rapidly – with average demand for deals placed in 2019 YTD outstripping average demand in FY18.

“A number of issuers from Turkey have taken advantage of a very constructive emerging market issuance environment that few market participants anticipated at the start of the year,” said Stefan Weiler, head of CEEMEA debt capital markets at JPMorgan. “Issuance from Turkey benefited from the very limited primary supply last year and a quite clear political calendar.”

Demand for a bargain

Turkish Eurobond deals placed so far this year generated demand of at least USD 23.2bn-equivalent, according to data available to Debtwire*. On average, the deals placed in 2019 YTD were 2.62x oversubscribed, according to the data, compared to an average of 2.51x in FY18.

The oversubscription level in 2019 YTD also compares favourably with the 2.57x average in 1Q18, before last year’s currency crisis struck. The resiliency of demand suggests that market appetite for new issuance from Turkey is far from saturated.

“I think we’ll be seeing plenty more Turkish issuance as the year unfolds,” said Kevin Daly, portfolio manager at Aberdeen Asset Management. “We’ve been in a risk-on environment, which has been supportive for Turkish issuers. A good example of that was Yapi Kredi’s Tier 1 issue in January, the first ever Additional Tier 1 bond by a Turkish issuer,” he continued.

Source: Debtwire data. Books data unavailable for deals in red.

With sovereign, financial and corporate bonds trading at deep discounts to par in 2018, asset managers may have spotted a bargain in the Turkish souk. “After underperforming last year, it is also more likely that investors see more attractive value proposition in Turkey relative to other jurisdictions,” said JPMorgan’s Weiler.

Ten hard currency Eurobond deals have been placed in 2019 so far. The volume issued this year – USD 9.4bn – is fast closing in on total FY18 volume of USD 11.8bn from 14 deals.

Three blue-chip corporates took advantage of the buoyant market to place deals in the last few weeks – Turk Telekom, Koc Holding, and Sisecam – already outstripping the number of corporates to issue Eurobonds last year. The three corporate deals were, on average, 3.4x oversubscribed.

Citi takes top spot; HSBC tumbles out of top 10

In a sign that some banks may be consciously stepping back from Turkey, despite the fizzy new issuance market, HSBC – which was the top-ranked bookrunner in the country last year – has slipped out of the top 10 bookrunners in Turkey YTD.

Citi has leapfrogged to the number one bookrunner spot by both value and deal count in 2019 YTD, up from fifth place last year. It is joined by fellow US-based bank JPMorgan and by Deutsche Bank in the top three places by value.

*Subscription level calculations exclude deals for which Debtwire has no books data.

David Graves Associate Editor Debtwire

David is an associate editor at Debtwire CEEMEA, where his coverage focuses on high yield, distressed debt and restructuring situations across the region – reporting on high profile situations such as Agrokor, Steinhoff and Dana Gas. He previously reported on new bond and loan issuance from the Middle East. Prior to joining Debtwire, David completed an MA in Medieval History at the University of St Andrews.