* Guidance revised to mid-swaps +190-200 bps
* Represents healthy premium to 2018 Eurobond
* Demand so far over $5 bln
* Will serve as benchmark for future issues
By Nevzat Devranoglu
ISTANBUL, Sept 17 Turkey is expected to raise
$1-1.5 billion through a sovereign sukuk that will mark the
country's first foray into the global Islamic bond market,
bankers said on Monday.
The bond, with a maturity of 5-1/2 years, is set to be
finalised on Tuesday and will set a benchmark for future sukuk
issues by Turkish banks and companies.
"A $1 billion issuance will be a good start for Turkey,"
said Osman Akyuz, secretary general of the association of
"participation banks", a term used in Turkey to refer to Islamic
"Costs seem at reasonable levels. I expect maturities to be
longer in issuances from now on."
Bankers said demand for the bond was already more than $5
billion and was expected to rise further. Bookbuilding will
continue on Tuesday because Monday was a holiday in Malaysia,
where there is strong appetite for Islamic bonds.
The Turkish sukuk is also expected to attract strong
interest from Gulf investors, who have traditionally focused on
their own region. Globally, the Islamic bond
market is estimated to be worth around $100 billion.
Bankers said guidance for the bond was revised to 190-200
basis points over mid-swaps, which equates to around 2.9
percent, from an earlier 200-210 basis points due to the strong
demand. That would mark a small but healthy premium to Turkey's
sovereign Eurobond maturing in 2018, which was
trading at around 2.74 percent on Monday.
Turkey, rated 'BB' by Standard & Poor's, held investor
meetings for the Islamic bond in several Gulf cities last week.
Citigroup, HSBC and Kuwait's Liquidity House, a
unit of Kuwait Finance House, are managing the sale.
Prime Minister Tayyip Erdogan's government, which espouses
Islamic values, had shied away from a sovereign sukuk during its
first decade in power, for fear of giving ammunition to critics
who accuse it of seeking to roll back state secularism. Because
of these sensitivities, sukuk are referred to as "participation
Turkey has been a frequent issuer of conventional
dollar-denominated bonds so it has a well-developed yield curve.
The treasury has raised a total of $4.6 billion this year by
selling Eurobonds, in line with its external borrowing target of
$4.5 billion in 2012.
Turkey is expected to issue a lira-denominated sukuk, its
second sovereign Islamic bond, by the end of September and
demand for the instrument is likely to be high, the Turkish unit
of Bahraini lender Al Baraka said last
week. The issue was expected to be around
1.5-2.0 billion lira with a maturity of two years.