Fitch rates Turkey’s USD Sukuk ‘BBB-‘

Fitch Ratings has assigned Hazine Mustesarligi Varlik Kiralama Anonim Sirketi’s (Hazine) USD1.5bn of global certificates (Sukuk), due 26 March 2018, a ‘BBB-‘ rating. The certificates have a profit rate of 2.803%.
Hazine, an asset leasing company incorporated solely for the purpose of participating in this transaction, is wholly owned by the Republic of Turkey, acting through the Undersecretariat of the Treasury.
The rating reflects Fitch’s judgement that the Sukuk can be considered an unconditional, unsubordinated and general obligation of the Republic of Turkey, ranking equally with Turkey’s other senior unsecured obligations. The rating is therefore in line with Turkey’s Long-term foreign currency Issuer Default Rating (IDR) of ‘BBB-‘ on which the Outlook is Stable.
The Sukuk follows an ijara’ (leasing) structure. The issuer has purchased publicly-owned real estate from the Republic of Turkey using the proceeds from the Sukuk. These assets have been leased back to the Republic for a period equal to the tenor of the Sukuk; in return the Republic makes semi-annual rental payments to the issuer at least equal to periodic distribution amounts made by the issuer to the Sukuk investors.
The transaction documents incorporate a purchase undertaking requiring the Republic to repurchase the assets on maturity (or earlier, in the event of dissolution/default), together with any outstanding distribution. Certificates are unsecured and certificate holders have no direct recourse to the lease assets.
While certain transaction documents relating to this issue, being governed by English law, may not be enforceable under applicable law, including Turkish law, Fitch’s rating for the certificates reflects the agency’s belief that the Republic of Turkey would stand behind its obligations under the transaction documents.
By assigning a rating to the certificates, Fitch does not express an opinion on the Sukuk structure’s compliance with Sharia principles.
Source: bne

HSBC sharpens Islamic banking focus in Turkey

Europe’s biggest bank HSBC is sharpening its focus on Islamic lending in Turkey and across the Middle East, the deputy general manager of its Turkish unit has told Reuters in an interview late on Tuesday.

HSBC’s Huseyin Ozkaya said the bank was also working seriously on issuing Islamic bonds in Turkey and was waiting for the Turkish Treasury to create regulations in this area.

Islamic banking, under which banks do not pay or charge interest in line with Islamic law, is fast expanding from a low base in predominantly Muslim Turkey.

“The government must carry out legislative changes in connection with Islamic bonds… We have carried out serious work on this for when these (legislative changes) are completed,” he said.

He said the bank played a leading role in international consortiums issuing Islamic loans.

“HSBC is increasing its focus in this area as a bank which has come out solidly from the international crisis, while our international rivals are not showing the same sort of interest as before,” he said.

He said the bank this year had issued some 6-7 Islamic murabaha facilities, under which a financier buys a commodity and sells it to the customer at a higher price, complying with Islam’s ban on interest.

But he said that the volume of such syndications was set to decline to $300-400mn this year from $500-600mn a year earlier due to global market conditions.

“There is a serious contraction in international lending markets and this has had an impact on Turkey. There is a change in the profile of investors and a decline in liquidity,” he said.

HSBC Turkey will be affected by a reduction in consumer spending and this will have an impact on its performance in private banking, he said.

“Generally speaking there is not a serious worsening in our results, but they will definitely reflect international markets,” he said.

He also said he did not expect significant public offerings in Turkey this year.istanbul010