Turkish eurobond is unlikely to attract foreign investors
LONDON – Overseas institutional investors are unlikely to take up Turkey’s new eurobond offering and local domestic investors will be the target for the deal, overseas fund managers said yesterday. The bond is expected to have a 2008 maturity and be priced at a risk premium of around 550 basis points (5.5 percentage points) over US Treasuries, traders and investors said. The bond is expected to launch this week led by Credit Suisse First Boston and Morgan Stanley Dean Witter. «It does not look very attractive compared to the outstanding bonds. Mainly local retail investors are targeted,» said Michael Ganske, emerging debt portfolio manager at Deutsche Gesellschaft Fuer Wertpapiersparen (DWS) in Germany. Turkey’s existing December 2008 bond was yielding 10.367 percent on Tuesday, while the new bond, at a spread of 550 basis points over US Treasuries, would yield 10.125 percent. Even so, institutional buyers will be encouraged by the new bonds if they prove popular at home, because that would show that Turkish locals have confidence in the country’s $16-billion International Monetary Fund (IMF)-backed program. «It would show that local investors and society are more in support of the government,» said DWS’s Ganske. At this time last year, Turkish domestic investors were exporting dollars at a furious pace, reacting to the collapse of an IMF-backed currency peg in February. Local markets have already shown signs of confidence and willingness to invest in Turkish paper. Lira denominated bonds yields fell to 68.47 percent at an auction in Turkey on Tuesday, extending a trend of falling yields. Yields were above 71 percent at the start of the year. Under its IMF program, Turkey is targeting annual inflation of 35 percent by the end of 2002. «It seems they have a very good local book. The deal is targeted at local Turks,» said a fund manager in Paris. «The leads said that locals had very small allocations when they tapped the 2006 bond.» Turkey increased its 2006 bond by $250 million in February, at 105.125 percent of face value. That bond was quoted at 106.375 percent of face value yesterday. The country signed its IMF agreement in February which envisaged $2.5 billion of public international debt issuance in 2002. Turkey is rated B- by ratings agency Standard & Poor’s, B1 by Moody’s Investors Service and B by Fitch.
