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Can Turkey's booming infrastructure market absorb funding cost spikes?
13 January 2012
Deal flow in Turkey is booming, but so is bank cost of funding and project debt margins. Demand for liquidity is also beginning to outstrip supply. The Turkish market is the place to lend, but it is not without problems. By Sean Keating.
The Turkish project market – one of the most active in Europe – had, until recently, escaped much of the fallout from the global financial crisis. But with the crisis in the Eurozone and a vast programme of privatisation and greenfield projects to be financed, local bank liquidity is beginning to look stretched.
There have been some local project financing highlights. In August, Garanti Bank sole lead arranged and closed the first Turkish Lira-denominated financing – a 10-year (seven years amortisation and three-year grace period) L120 million ($69 million) deal for Altek Alarko’s L200 million 76MW Karakuz hydro electric project in southern Anatolia.
The deal was followed by Standard & Poor’s increasing Turkey’s Turkish Lira long-term credit rating to investment grade (BBB-), which makes future similar financings more likely. But even an adolescent Lira project debt market – and that is some way off – could only meet a tiny...
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