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14th Turkish Oil & Gas International Conference
Ankara, 18-19 March 2015
Oil & Gas Financing: current challenges and trends
Richard Sentkar
Senior Banker Oil & Gas
2
The various players of the “oil & gas commodity chain”
… and their respective financing requirements
Producers Oil & gas producers
Transformers Refineries Petrochemicals LNG Plants
Traders Small traders Large trading companies Trading groups of large companies
Distributors Bunkering Wholesale Gas retail
Downstream MidstreamUpstream
Transportation Logistics
Each category of players needs specific set of financing products.
Financing mainly provided by banks but also by Capital Markets, Multilaterals, Funds
The mix between those sources of financing constantly adapt to the environment.
Mainly Bank Debt
Structurally highly leveraged
No fixed assets
Mostly ST financing
Capital Markets + Bank Debt
Important fixed assets (LT)
Capital intensive
LT financing for Capex
ST financing for Opex
Bank Debt + Capital Markets
Fixed assets with MT financing needs
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
Executive summary
3
The new strategies of banks, taking into account all the new constraints in compliance, corporate & social responsibility, solvency and liquidity ratios (Basel III)
The current oil & gas market environment with a sharp drop in crude oil prices
The geopolitical environment, leading to both constraints (sanctions) and opportunities (strategic projects)
1. Current trends and challenges are mainly determined by:
A wider diversity of sourcing, with overall good liquidity and low interest rates
The importance of institutional lenders, like multilaterals, Export Credit Agencies, Sovereign Wealth Funds
An adequate risk management policy, to protect the cash flow and the balance sheet (legal contingencies).
2. Solutions for new oil & gas financing are based on
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
3. Specific opportunities arise from the current environment
M&A and acquisition finance opportunities due to (1) asset disposal programs of many oil companies and (2) lower market caps of good players
Financing of state-backed strategic projects, like SCP with pipelines linked to long-term strategic needs.
Key drivers: selectivity, responsibility, liquidity
4
Key messages on banks
What is our DNA ? What should be our client base and footprint ? Centralized vs. Regional ? Big means vulnerable?
Redefinition of Corporate & Investment Banking strategy, like inter alia in BNPP, Barclays, Deutsche Bank, Credit Suisse
More strategic client driven than opportunistic deal driven
Quality of the revenues and the balance sheet is more important that size
Huge fines were a trauma, reputation and liabilities are at stake
1. International banks are redefining their overall strategies
Risks linked to compliance and CSR aspects: oil and gas sector is heavily linked to sanctions and reputation
Credit risk linked to crude oil price drop and need for restructuring of many assets, liquidity stress
2. Banks active in the oil & gas sector are challenged in their capacities to adapt
Main international banks still offer the widest range of products, but are selective in their final takes
Main banks still act as global coordinators, advisors, due to their stronger experience
Local and regional banks have a growing role in the financing of oil & gas
Multilaterals and Export Credit Agencies have a major role for compliance aspects and long-term liquidity access
Disintermediation is growing as an alternative to the banking market: debt capital market, private equity, SWF
Main consequences of points above for oil & gas financing are:
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
5
Key drivers and main questions addressed by banks
Main preconditions to financing
Stakeholders need to comply with international sanctions, regulations and laws. Pressure on Banks to reinforce Know Your Customer (KYC) process. What is new? bigger fines and guilty plea
Stakeholders need to care more about their image and communication
Compliance and Corporate & Social Responsibility
Intrinsic strength of the project: is the rational sound, are the assets and technical aspects economically viable over time ?
Exposure to external factors: mainly political aspects that could adversely interfere, need to anticipate market evolution
Delay in major projects have a real impact on credibility, costs and appetite from investors and financial institutions
Sustainability and viability
Even if liquidity is less of an issue than two years ago, banks need to comply with Basel III and with Liquidity Cover Ratio
Liquidity is currently good over all, with many funding sources possibilities
Banks should distribute more loans to other banks (syndication) and to non-banking sector (insurance, securitization, funds...)
Access to liquidity and loan distribution
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
6
Decision process usually include:
Decision Process to finance major projects
To identify the stakeholders, the main features of the project, and the project environment
To decide whether financing that project is acceptable and / ot in line with the current strategy of the bank
To determine what additional information is needed to go through the credit approval process
Screening of the project
To collect all possible factual elements on the project and on its stakeholders
To run a proprietary model
To establish a precise risk matrix, with pros and cons and mitigants
Comprehensive due diligence
To finalize the credit application
To go through different credit committees (2 minimum, 3 maximum)
Final credit approval process
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
7
Risk Management: why hedging ?
Hedging should be considered as an insurance to mitigate risks and makes it easier to meet economic and management objectives
Such objectives could include meeting budget targets for exporting countries, or financial ratios for companies, like EBITDA margins, Debt / EBITDA, Dividends
4 reasons to hedge: To limit impact of price volatility on company’s cash flow
To protect company against variations
To provide more predictability to company’s management and stakeholders
To lock-in margin
There could be also some “new” reason: Some banks participating in syndication or some investors ready to take part of the risk in a financing, do not want to
take the price risk fluctuation and would like deals to be hedged.
Fundamentally, these are fixed income investors (pension funds, asset managers) who are seeking stable cash flows
The lower the market risk these investors are exposed to, the better the pricing offered to borrowers
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
8
Tenors ranging from 3 to 5/7 years:
Pre-Export financing
RBL financing
Financing solutions primarily rely on structured debt products
Borrower at advanced stage of development: producing asset with minimum track record
Legal/political risk mitigated with production license already in place or guaranteed to be in place in a short period of time
Easy access to export routes (pre-requisite for PXF facility)
Financing documentation in foreign law
Minimum “offshorisation” requirements: including offshore collection / reserve accounts
Key factors of success
Specific approach: financing small to middle size Caspian producers
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
9
Banks such as BNP Paribas remains at the centre of the New Paradigm
Banks: Are better positioned to understand & manage the market risk Can offer to both borrowers and financing providers structured solutions combining lending, hedging and distribution
because they are the natural conduit between borrowers and debt investors as we have a long standing history of working with both arms.
Banks are best positioned to help both borrowers & non-traditional lenders to capture those changes and adjust their models accordingly
Can structure a transaction that maximises the chances of success – delivering the right features for the right market conditions
BNP Paribas is very well positioned to play a leading role in this change: 50 years of experience in the Commodity sector 2014 M&A Awards – Turkey Financial Adviser of the Year (Mergermarket 2014) STAR Refinery - Bond & Loans Awards Turkey 2014 (Project Finance deal of the Year, Trade & Export Deal of the Year,
Syndicated Loan of the Year) #1 Bookrunner & MLA in EMEA Syndicated Loans by volume and # of deals for upstream oil & gas (Dealogic 2014) Trade Finance Awards for Excellence 2014 – Best Export Finance Arranger (Trade Finance Magazine – June 2014) Trade Finance Deal of the Year Awards (TFM – March 2014) Energy Risk Awards – Oil & Products House of the Year (Energy Risk Magazine – June 2014) 4th Cash Management bank in the world, 3rd in Western Europe (Euromoney - July 2014) Islamic Finance News, Deals of the Year 2014 “House of the Year”, “Interest Rates House of the Year” & “Credit House of the Year” (Structured Products Europe Awards 2013) “Commodity House of the Year” & “Commodity Finance & Structured Products” (Commodity Business Awards 2013) Bank of the Year (IFR December 2012)
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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1. Appendix: EMEA and Oil & Gas loan syndication markets
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
11
2014 was a record year in the EMEA loan market since the crisis…
2014 loan volume in EMEA: the highest since 2007, standing at USD 1,244bn (+22% vs. 2013).
Lending activity was driven by record refinancing levels and the return of acquisition financing:
− High levels of market liquidity and strong competition between banks allowed borrowers to refinance existing debt on
better terms.
− Confidence grew among borrowers to make debt financed acquisitions, while strong bond markets gave lenders the
comfort of quick take outs through the capital markets.
Source: Dealogic Loan Analytics 2015
EMEA Syndicated Loan Volumes
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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Loan syndication market in Oil & Gas
Oil & Gas transactions remained attractive for banks as they have been in search of yield and structured transactions.
Despite a general reduction in pricing, banks generally continued to be short of assets in 2014, which was reflected in low
decline rates and large oversubscriptions on transactions.
Source: Dealogic Loan Analytics 2015
EMEA Oil & Gas Loan Volumes
2014 showed a sustained appetite for Oil & Gas transactions…
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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... particularly in the Exploration & Production sector…
Historically, Oil & Gas loan volumes were mainly driven by deals signed in the upstream sector.
In 2014, volumes were split as followed: 48% upstream / 41% midstream / 11% downstream.
Source: Dealogic Loan Analytics 2015
EMEA Oil & Gas Loan Volumes – Sector split
Loan syndication market in Oil & Gas
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
14
... and in the North Sea…
Oil & gas volume evolution is contrasted depending on geography:
Skyrocketing volumes in Northern Europe due to strong activity in the North Sea
Collapse of Russia / CIS volumes due to geopolitical reasons
Africa and the Middle East slightly behind
Source: Dealogic Loan Analytics 2015
EMEA Oil & Gas Loan Volumes Regional Split
Loan syndication market in Oil &Gas
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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... with a strong domination of Norway
In 2014, Norwegian Oil & Gas loan volumes were multiplied by 2.5 to USD 21bn compared to 2013.
The volume uplift was particularly important in the upstream Oil & Gas sector where 9 transactions were signed including
the USD 3bn RBL secured by Det Norske to finance the acquisition of Marathon Oil Norge.
Source: Dealogic Loan Analytics 2015
3.3x
EMEA Oil & Gas Loan Volumes 2014 Country split Norway Oil & Gas Loan Volumes Evolution
Loan syndication market in Oil & Gas
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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Loan Syndication Market in Oil & Gas: 2015 may be a more challenging year
Very early trends in January and February show an increase in volume due to stronger activity in the Midstream section
while the volume of Upstream transactions has decreased.
The drop in the oil price could make it difficult for some companies to meet covenants on existing loans and may raise
companies' borrowing costs in the global loan market.
Oil prices will be a major consideration for banks looking to lend to oil clients.
Banks will be looking closely at how it will impact certain credits and how to structure these loans so that they have the
necessary security elements and protection.
Source: Bloomberg 2015 Source: Dealogic Loan Analytics 2015
Brent Price Evolution Loan Volume Evolution
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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Loan Syndication Market: EMEA Upstream Oil & Gas League Tables
EMEA Upstream Oil & Gas – MLA League TableFY 2014
(ranked by volume)
Pos. MLA US $ m No. % share
1 BNP Paribas 5,129.23 32 10.61
2 SEB 2,613.15 13 5.41
3 DNB Markets 2,543.60 14 5.26
4 Standard Chartered Bank 2,527.45 13 5.23
5 Nordea Markets 2,091.54 6 4.33
6 Societe Generale 2,061.46 16 4.26
7 ING 2,034.36 19 4.21
8 Citi 1,889.80 10 3.91
9 HSBC 1,794.18 13 3.71
10 Natixis 1,762.98 14 3.65
11 Credit Agricole CIB 1,731.40 14 3.58
12 Mitsubishi UFJ Financial Group 1,476.04 12 3.05
13 RBS 1,338.86 8 2.77
14 FBN Holdings plc 1,230.00 3 2.54
15 Deutsche Bank 1,206.25 7 2.50
16 Sumitomo Mitsui Financial Group 1,064.88 8 2.20
17 ABN AMRO Bank 1,046.29 8 2.16
18 Ecobank Ghana Ltd 901.18 1 1.86
19 UniCredit 832.21 5 1.72
20 Bank of America Merrill Lynch 805.50 6 1.67
EMEA Upstream Oil & Gas – Bookrunner League TableFY 2014
(ranked by volume)
Pos. Bookrunner US $ m No. % share
1 BNP Paribas 3,970.97 11 16.47
2 Standard Chartered Bank 2,656.25 6 11.02
3 Nordea Markets 1,758.97 4 7.29
4 SEB 1,466.96 4 6.08
5 DNB Markets 1,442.48 4 5.98
6 Citi 1,257.31 3 5.21
7 ABN AMRO Bank 1,034.55 3 4.29
8 HSBC 998.56 5 4.14
9 ING 925.74 5 3.84
10 Ecobank Ghana Ltd 901.18 1 3.74
11 Natixis 876.25 5 3.63
12 Scotiabank 792.31 2 3.29
13 RBS 740.00 1 3.07
14 Societe Generale 570.00 3 2.36
15 Itau BBA 566.67 1 2.35
16 Credit Agricole CIB 500.00 2 2.07
17 Rabobank 467.88 2 1.94
18 Mitsubishi UFJ Financial Group 442.31 2 1.83
18 Lloyds Banking Group 442.31 2 1.83
18 Commonwealth Bank of Australia 442.31 2 1.83
BNP Paribas was # 1 Bookrunner and Mandated Lead Arrangerin the Upstream Oil & Gas sector in EMEA for FY 2014 by volume & number of deals
Source: Dealogic Loan Analytics, 2015
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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Loan Syndication Market: EMEA Oil & Gas League Tables
EMEA Oil & Gas – MLA League TableFY 2014
(ranked by volume)
Pos. MLA US $ m No. % share
1 ING 7,382.70 49 7.33
2 BNP Paribas 7,246.79 49 7.19
3 DNB Markets 4,679.91 29 4.65
4 Nordea Markets 4,184.70 21 4.15
5 HSBC 4,171.86 28 4.14
6 Societe Generale CIB 4,164.75 28 4.13
7 Standard Chartered Bank 3,964.73 21 3.94
8 Deutsche Bank 3,579.46 17 3.55
9 SEB 3,415.92 20 3.39
10 ABN AMRO Bank 3,258.39 25 3.23
11 RBS 3,097.22 14 3.07
12 UniCredit 3,038.73 15 3.02
13 Citi 2,976.05 15 2.95
14 Natixis 2,912.23 22 2.89
15 Credit Agricole CIB 2,864.21 22 2.84
16 Mitsubishi UFJ Financial Group 2,671.24 23 2.65
17 Rabobank 2,237.20 15 2.22
18 Sumitomo Mitsui Financial Group 2,068.66 16 2.05
19 Lloyds Banking Group 1,923.58 10 1.91
20 FBN Holdings plc 1,556.25 4 1.54
EMEA Oil & Gas – Bookrunner League TableFY 2014
(ranked by volume)
Pos. Bookrunner US $ m No. % share
1 ING 7,366.80 23 11.60
2 BNP Paribas 5,464.66 16 8.60
3 DNB Markets 4,578.51 13 7.21
4 Nordea Markets 4,518.88 14 7.11
5 Standard Chartered Bank 3,934.17 10 6.19
6 ABN AMRO Bank 2,817.96 10 4.44
7 HSBC 2,738.60 11 4.31
8 Deutsche Bank 2,731.03 9 4.30
9 RBS 2,496.13 5 3.93
10 Societe Generale CIB 2,454.53 8 3.86
11 UniCredit 1,947.96 6 3.07
12 Rabobank 1,901.19 7 2.99
13 Citi 1,777.31 5 2.80
14 SEB 1,765.28 6 2.78
15 Lloyds Banking Group 1,409.89 4 2.22
16 Credit Agricole CIB 1,384.24 5 2.18
17 Natixis 1,315.69 7 2.07
18 Ecobank Ghana Ltd 901.18 1 1.42
19 Scotiabank 792.31 2 1.25
20 DBS 782.10 3 1.23
BNP Paribas was # 2 Bookrunner and Mandated Lead Arrangerin the Oil & Gas sector in EMEA for FY 2014 by volume
Source: Dealogic Loan Analytics, 2015
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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2. Appendix: An overview on Export Finance
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
Export Finance 2014 – Top ten borrowing countries
1. United States 22,923.4 26 18.4%
2. Australia 9,744.1 5 7.8%
3. Turkey 7,056.7 24 5.6%
4. Saudi Arabia 6,906.0 3 5.5%
5. Brazil 6,744.6 16 5.4%
6. UK 6,590.5 7 5.3%
7. Turkmenistan 4,897.0 4 3.9%
8. Indonesia 4,605.4 15 3.8%
9. Norway 3,491.7 14 3.6%
10.Netherlands 2,899.7 2 3.0%
Amounts in USD million, number of deals, percentage of total volumes
2014th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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Oil & Gas value chain: ECA involvement and how BNP Paribas is positioning ?
Some landmark deals impacting the market each year
2014
38 deals have been signed for a total deal amount of USD 42Bn
• 5 biggest deals represent 56% of the market : Cameron LNG LLC (USA): USD
7.4Bn Ma'aden Waad al-Shamal
Phosphate Co (Saudi Arabia): USD 5.7Bn
FLNG Liquefaction LLC (USA): USD 4.2Bn
Star Rafineri AS (Turkey): USD 3.3Bn
Oman Refineries & Petrochemicals Co (Oman): USD 2.9Bn
BNPP Participated in 8 deals as MLA, Facility Agent or Arranger in Turkey, Norway, Brazil and Russia for a total deal amount of 14.2Bn (33%, 20.1% excluding Ma’aden)
2012
33 deals have been signed for a total deal amount of USD 44.9Bn
5 biggest deals represent 72.6% of the market :
Ichthys LNG Pty Ltd (Australia): USD 16Bn
Australia Pacific LNG Processing Pty Ltd (Australia): USD 8.5Bn
Braskem Idesa SAPI (Mexico): USD 3.9Bn
Uz-Kor Gas Chemical LLC JV (Uzbekistan) : USD 2.579Bn
Reliance Industries Ltd (India) : USD 2Bn
BNPP Participated in one deal: Archer (Norway) : USD 40M (1%) as sole MLA
2013
38 deals have been signed for a total deal amount of USD 34.2Bn
• 5 biggest deals represent 45% of the market : Nghi Son Refinery &
Petrochemical LLC (Vietnam): USD 5Bn
Sadara Chemical Co (Saudi Arabia): USD 3.9Bn
Abu Dhabi National Oil Co (UAE): USD 3Bn
Reliance Industries (India): USD 2Bn
Sevan Drilling (Norway): USD 1.75Bn
BNPP participated in 8 deals as MLA or Facility Agent in Norway, Nigeria, Saudi Arabia and Bulgaria for a total deal amount of USD 10.7Bn (31.3%, 19.6% excluding Sadara)
Source: Dealogic Analytics
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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Export Finance: Main Takeaways
O&G is one of the most CAPEX intensive industry. Almost all ECAs have a role to play in the value chain given the combination of 3 factors
Large eligibility angles: Substantial offshore contracting (equipment and services) required for developing these projects trigger eligibility under
traditional tied ECA financing scheme.
Range of contracting required expertise spread in different locations leading to consider involvement of a wide spectrum of ECAs.
Deemed strategic investment (equity) / offtake paving the way for untied ECA financing route in some projects
Lack of alternative funding options for most of projects in the context of: Tighter liquidity from commercial bank market (post-Lehman)
Bond market not able to deal with construction period
Multilaterals occasionally only (infra / pipelines mainly; PCS issues with ECAs for onshore projects) while ECA financing can be innovative in some of these large O&G projects (mini-perm Sabine pass LNG in the US, riyal tranches in Jubail, Sadara)
Limits in the risk -taking -appetite from pure private market (intrinsic risk, challenging jurisdiction)
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
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3. Appendix: An overview on Debt Capital Market in Turkey
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
BNP Paribas – A Leading Debt Capital Markets House in TurkeyBNPP is highly active in Turkey with a range of clients across sectors and in different currencies
Bookrunner Deal value (USDm)
No. of tranches
Share (%)
1 BNP Paribas 351 3 21
2 JPMorgan 325 3 18
3 Citi 275 2 16
4 Barclays 200 2 12
4 Emirates NBD 200 2 12
6 HSBC 150 1 9
7 Deutsche Bank 100 1 6
7 Standard Chartered 100 1 6
Koç Holding A.Ş.Baa3 (Moody’s)
BBB- (S&P)Ratings Advisor
April 2013
Şişecam A.Ş.Ba1 (Moody’s)
BB+ (S&P)Ratings Advisor
April 2013May 2013
Turk TelekomBBB- (S&P)BBB- (Fitch)
Ratings Advisor
July 2014 Albaraka TürkUSD 200,000,0007.750% Due 2023
Global Coordinator
April 2013
June 2013
Garanti BankUSD 9,000,000
Due 2013Sole Bookrunner
May 2013
Şişecam A.Ş.USD 500,000,0004.250% Due 2020Joint Bookrunner
May 2013May 2013
TEBUSD 65mn Due 2023 EUR 125mn Due 2023
Sole Bookrunner
June 2013
Koç Holding A.Ş.USD 750,000,0003.500% Due 2020Joint Bookrunner
April 2013
VakifbankUSD 600,000,0007.500% due 2018Joint Bookrunner
April 2013 February 2013
Garanti BankTRY 750,000,0007.375% Due 2018Joint Bookrunner
May 2013
Türkiye İş BankasıUSD 500,000,0005.500% Due 2019Joint Bookrunner
October 2013
May 2013
Yapı Kredi Bankası USD 500,000,0005.250% Due 2018Joint Bookrunner
November 2013May 2013
Türkiye İş BankasıUSD 400,000,0007.850 % Due 2023Joint Bookrunner
December 2013May 2013
Yapı Kredi Bankası USD 5mn Due 2014CHF 10mn Due 2014KWD 10mn Due 2014
Sole Bookrunner
January 2014May 2013
Republic of TurkeyUSD 1,500,000,0006.700% due 2045 Joint Bookrunner
February 2014
Source: Bloomberg 4th February 2015
January 2013
Republic of TurkeyUSD 1,500,000,0003.250% due 2023 Joint Bookrunner
VakifbankEUR 500,000,0003.500% due 2019Joint Bookrunner
June 2014May 2013
Turk Telekom USD 500mn due 2019USD 500mn due 2024
Joint Bookrunner
June 2014May 2013
ArçelikEUR 350,000,0003.875% due 2021Joint Bookrunner
September 2014May 2013
Republic of TurkeyUSD 1,500,000,0004.875% due 2043 Joint Bookrunner
January 2015
24
All Corporate Turkish Bonds – 2014
Turkish Issuers For Whom BNPP has Provided Rating Advisory Service
Exceptional Exposure to Turkish Debt Capital Markets
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
40%
28%
28%
4%
%US Europe
UK Other
19%
19%
17%16%
23%
6%
%
Germany
France
UK
Switzerland
Rest of Eu
ME/Others
Turkey Primary Market Overview
Date Issuer Rating* Size (Mn) Maturity Coupon (%)
2015
04-Feb Turkiye Halk Bankasi Baa3/BBB- USD 500 Feb-21 4.7526-Jan Vakifbank Ba3/BB+ USD 500 10NC5 6.87515-Jan Akbank Baa3/BBB- USD 500 Jan-20 4.0007-Jan Turkey Baa3/BBB- USD 1500 Apr-43 4.8752014
18-Nov Turkey Sukuk Baa3/BBB- USD 1000 Nov-21 4.48906-Nov Global Ports B1/BB- USD 250 7NC4 8.12530-Oct Yasar Holding B2/B USD 250 6NC3 8.87523-Oct Turkiye Is Bankasi Baa3/BBB- USD 750 Apr-20 5.00021-Oct Sinai Kalkinma Bankasi Baa3/BBB- USD 350 Oct-19 5.37515-Oct Yapi Ve Kredi Bankasi Baa3/BBB USD 550 Oct-19 5.12516-Sep Turk Eximbank Baa3/BB+ USD 500 Sep-21 5.0009-Sep Arcelik BB+/BB+ EUR 350 Sep-21 3.87516-Jul Alternatifbank A/NR USD 250 Jul-19 3.12501-Jul Turkiye Garanti Bankasi Baa3/BBB- EUR 500 Jul-19 3.37526-Jun Ziraat Bank Baa3/BBB- USD 750 Jul-19 4.25024-Jun Al Baraka Turk BB/NR USD 350 Jun-19 6.25019-Jun Kuveyt Turk BBB/NR USD 500 Jun-19 5.16218-Jun Turkiye Is Bankasi Baa3/BBB USD 750 Jun-21 5.00012-Jun Turk Telekomunikasyon BB+/BBB- USD 500 Jun-24 4.87512-Jun Turk Telekomunikasyon BB+/BBB- USD 500 Jun-19 3.75010-Jun Vakifbank Baa3/BBB- EUR 500 Jun-19 3.50028-May Turkiye Halk Bankasi Baa2/BBB- USD 500 Jun-19 4.75025-Apr Finansbank Ba2/BBB- USD 500 Apr-19 6.25015-Apr Finans Katilim Bankasi NR/BBB USD 500 Apr-19 5.37510-Apr Turkiye Garanti Bankasi Baa2/BBB USD 750 Oct-19 4.75008-Apr Republic of Turkey Baa3/BBB- EUR 1000 Apr-23 4.12512-Feb Republic of Turkey Baa3/BBB- USD 1,500 Feb-45 6.62522-Jan Republic of Turkey Baa3/BBB- USD 2,500 Mar-24 5.750
2008 2009 2010 2011 2012 2013 2014 2015
0
3
6
9
12
15
18
0
5
10
15
20
25
30
35
4.0 3.8
9.0
5.3
16.4 16.4 17.1
3.0
Volume (bn, $ eqv.) LHS Nbr of Deals RHS
31%
35%
26%
8%
%US Europe
UK Other
Initial Orderbook: USD 3.1bn
Turk Telekom USD 500mn 10Y
Initial Orderbook: USD 2.6bn
Koç Holding USD 750mn 7Y
Initial Orderbook: USD 2.75bn
Turk Telekom USD 500mn 5Y Arcelik EUR 350mn 7Y
Initial Orderbook: EUR 900mn
Despite market volatility in 2014, a decent pipeline has emerged from Turkey
25
65%17%
13%5%
%US Europe
UK Other
Selected Recent Growth Markets Bond Issuance Turkish International Primary Market Historical Activity
Geographic Distribution of Recent Corporate Deals
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
Date Issuer Ratings Format Size (mn) Maturity Coupon
Nov-14 Global P B1/NR/BB- 144A/RegS USD 250 7NC4 8.125%
Oct-14 Yasar B2/NR/B 144A/RegS USD 250 6NC3 8.875%
Sep-14 Arcelik NR/BB+/BB+ RegS EUR 350 7Y 3.875%
Jun-14 TT NR/BB+/BBB- 144A/RegS USD 500 5Y 3.750%
Jun-14 TT NR/BB+/BBB- 144A/RegS USD 500 10Y 4.875%
Sep-13 Coca-cola Baa3/NR/BBB 144A/RegS USD 500 5Y 4.750%
Aug-13 Mersin Baa3/NR/BBB- 144A/RegS USD 450 7Y 5.875%
May-13 Sisecam Ba1/BB+/NR 144A/RegS USD 500 7Y 4.250%
Apr-13 Koc Holding
Baa3/BBB-/NR 144A/RegS USD 750 7Y 3.500%
Apr-13 Arcelik BB+/NR/BB+ 144A/RegS USD 500 10Y 5.000%
2010 2011 2012 2013 2014 2015 YTD
0
5
10
15
20
0
5
10
15
20
25
30
35
Corporates
Banks
USD bn # of tranches
Turkey Corporate Market Overview
Turkish corporate issuance is remaining steady, representing 13% of volume (USD 6.3bn) since 2012
20%
80%
%
EUR
USD43%
27%
20%
10%
%
5-6 year
7-8 year
10-year
30-year
Currency Tenor
26
Historical Turkish Issuance Activity Since 2010
Break Down of All Turkish Issuances 2014
Turkish Corporate Public Bonds Issued Since 2013
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15
160
180
200
220
240
260
280
300
320Turkey '20 Turkey '25
Turkey '45
MS+ bps
Trading Performance of Selected Turkish Bonds
Source: BNP Paribas,
Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15
170
195
220
245
270
295
320
345
370
395Turkey '20 Turkey '21Turkey '23 Arcelik '21Garanti '19 Vakif '19
MS+ bps
Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15
130
180
230
280
330
380
430
480
Anadolu Efes '22 Arcelik '23
Coca Cola '18 Koc '20
Sisecam '20 Turk Telekom '19
Turk Telekom '24
MS+ bps
Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15
150
175
200
225
250
275
300
325 5-Year
10-YearMid
237
185
27
USD Sovereign Midswap Spreads Corporate Midswap Spreads
EUR Turkish Midswap Spreads Sovereign CDS Spreads
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
1731
6170
90100
120132
168
2016 2017 2018 2019 2020 2021 2022 2023 2024
100
135
170
205
240
275
310
345
Anadolu Efes (Baa3/BBB-)
Arcelik (BB+/BB+)
Coca Cola (Baa3/BBB)
Koç Holding (Baa3/BBB-)
Mersin (Baa3/BBB-)
Şişecam (Ba1/BBB-)
Tupras (Ba1/BBB-)
Turk Telekom (BBB-/BBB-)
Turkey (Baa3/BBB-)
USD MS+ bps
28
Issuer Rating Size (Mn) Maturity Coupon
(%)Yield (%)
Spread (MS+)
Turkish Sovereign Turkey Baa3/NR/BBB- USD 2,250 Apr-18 6.750 2.802 171Turkey Baa3/NR/BBB- USD 1,500 Mar-19 7.000 3.325 192Turkey Baa3/NR/BBB- USD 2,000 Jun-20 7.000 3.482 200Turkey Baa3/NR/BBB- USD 2,000 Mar-21 5.625 3.627 203Turkey Baa3/NR/BBB- USD 2,500 Sep-22 6.250 3.859 212Turkey Baa3/NR/BBB- USD 1,500 Mar-23 3.250 3.788 201Turkey Baa3/NR/BBB- USD 2,500 Feb-24 5.750 3.901 205Turkey Baa3/NR/BBB- USD 1,500 Feb-45 6.625 4.811 253Turkey Baa3/NR/BBB- EUR 1,250 Apr-19 5.875 1.748 149Turkey Baa3/NR/BBB- EUR 2,000 May-20 5.125 2.122 178Turkey Baa3/NR/BBB- EUR 1,250 Nov-21 4.350 2.376 192Turkey Baa3/NR/BBB- EUR 1,000 Nov-23 4.125 2.572 200Turkish Corporates Anadolu Efes Baa3/BBB-/NR USD 500 Nov-22 3.375 4.867 312Arcelik NR/BB+/BB+ EUR 350 Sep-21 3.875 3.980 354Arcelik NR/BB+/BB+ USD 500 Apr-23 5.000 5.468 368Coca Cola Baa3/NR/BBB- USD 500 Oct-18 4.750 3.083 188Global Ports B1/NR/BB- USD 250 7NC4 8.125 13.359 1170Koc Holding Baa3/BBB-/NR USD 750 April-20 3.500 4.078 260Mersin Baa3/NR/BBB- USD 450 Aug-20 5.875 4.401 289Sisecam Ba1/BB+/NR USD 500 May-20 4.250 4.672 319Tupras Ba1/NR/BBB- USD 700 May-18 4.125 4.140 303Turk Telekom NR/BBB-/BBB- USD 500 Jun-19 3.750 3.569 223Turk Telekom NR/BBB-/BBB- USD 500 Jun-24 4.875 4.617 275Yasar B2/NR/B USD 250 6NC3 8.875 8.094 669Turkish Financials AkBank Baa3/NR/BBB- USD 500 Mar-18 6.500 3.531 246AkBank Baa3/NR/BBB- USD 500 Oct-22 5.000 4.613 287Garanti Bank Baa2/BB/BBB- EUR 500 Jul-19 3.375 2.878 260Garanti Bank Baa2/BB/BBB- USD 750 Oct-19 4.750 4.210 282Halk Bank Baa3/NR/BBB- USD 750 Feb-20 3.875 4.545 310Halk Bank Baa3/NR/BBB- USD 500 Feb-21 4.750 4.896 332Is Bank Baa3/NR/BBB- USD 500 Oct-18 5.000 4.219 300Is Bank Baa3/NR/BBB- USD 750 Apr-20 5.000 4.542 307VakifBank Baa3/BB+/BBB- EUR 500 Jun-19 3.500 3.167 290Vakifbank Baa3/NR/BBB- USD 500 Jan-20 4.000 4.604 317Yapi Ve Kredi Baa3/NR/BBB USD 550 Oct-19 5.125 4.584 319Yapi ve Kredi Baa2/BB/NR USD 500 Jan-20 4.000 4.604 317
Secondary Market Update
Turkish Sovereign and Corporate USD Funding Curve
Corporate Spread vs Turkish Sovereign
Turkish Secondary Market Comparables
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015
29
2016 2017 2018 2019 2020 2021 2022 2023 2024100
135
170
205
240
275
310
345
Anadolu Efes (Baa3/BBB-)
Arcelik (BB+/BB+)
Coca Cola (Baa3/BBB)
Koç Holding (Baa3/BBB-)
Mersin (Baa3/BBB-)
Şişecam (Ba1/BBB-)
Tupras (Ba1/BBB-)
Turk Telekom (BBB-/BBB-)
Turkey (Baa3/BBB-)
USD MS+ bps
Turkish Sovereign and Corporate USD Funding Curve
Turkish Sovereign and Corporate USD Funding Curve
14th Turkish Oil & Gas International Conference Ankara, 18-19 March 2015