Istanbul airport builders likely to land record loan

Ziraat Bankasi, Turkiye Halk Bankasi and another three private lenders are close to agreeing to provide about €4.5bn ($5.5bn) for Istanbul’s third airport’s first phase, according to people familiar with the situation.

Bloomberg

Istanbul

The builders of Istanbul’s third airport, intended to be among the world’s busiest by 2020, are reducing the number of banks in talks to fund the project and may have Turkey’s biggest corporate loan in place next month.

Three state-run banks including TC Ziraat Bankasi and Turkiye Halk Bankasi, and another three private lenders are close to agreeing to provide about €4.5bn ($5.5bn) for the project’s first phase, according to four people familiar with the situation. As many as 10 banks were being considered earlier this year, Hakan Ates, chief executive officer of Denizbank, among the current group of financiers, said on June 17.

A loan that size would surpass the $4.75bn Ojer Telekomunikasyon arranged in May last year, the record for a Turkish company. The involvement of state banks may signify the importance of the project to President Recep Tayyip Erdogan, who wants Istanbul to develop into a major regional transportation hub, which would help the national carrier compete with long-haul rivals from the Middle East and Europe.

“The fact that the syndicate group consist of six Turkish banks, with three of the state-controlled banks having a higher exposure indicates that there was some political motivation to fund this project,” Apostolos Bantis, a credit analyst at Commerzbank AG in Dubai, said by phone on Thursday. “The fact that six of Turkey’s largest banks committed on this transaction should appease concerns and speculation about the viability of the project.”

Mehmet Cengiz, head of Cengiz Holding, said on November 22 that financing for the project had been arranged and confirmed that all of the lenders were Turkish. Cengiz spoke at Beylerbeyi Palace in Istanbul, where he said he was waiting to discuss the project with Erdogan following the Turkish President’s meeting with US Vice-President Joe Biden.

TAV Havalimanlari Holding, operator of Ataturk Airport, Turkey’s biggest, fell as much as 1.6% in Istanbul trading yesterday.

Yapi & Kredi Bankasi and Turkiye Garanti Bankasi join state-run Turkiye Vakiflar Bankasi to complete the group of lenders providing the finance, the people said, asking not to be identified as the negotiations are private. Ziraat will likely have the largest allocation in the loan and Garanti the smallest, three of the people said.

The loan may have a term of at least 15 years with a four-year grace period to cover construction, two of the people said. Arranging the financing may be completed in January, three of the people said.

Turkey is investing in aviation infrastructure to support Turkish Airlines as it builds a long-haul business to compete with European rivals. London’s Heathrow is currently the third-largest airport, behind Beijing and Atlanta, carrying 72mn travellers on its two runways in 2013, data from Airports Council International show. Traffic through Istanbul Ataturk Airport grew 14% last year, climbing to 18th spot with 51mn. Dubai handled 66mn travellers.

The new airport will eventually cost an estimated €10.3bn, according to Nihat Ozdemir, chairman of Limak Holding, among five Turkish construction companies contracted last year to build and operate it. The first phase is designed to handle 90mn passengers annually starting in 2018, according to the website of Ankara-based state airports authority DHMI.

The group of builders, led by Cengiz Insaat, will pay the government €22.1bn in fees during the 25 years the airport is projected to operate. It will eventually serve 150mn passengers, with six runways and 165 boarding bridges.

Ali Kirbas, a spokesman for Ziraat, confirmed the state-run lender’s involvement in the financing. A spokesman for Yapi Kredi declined to comment. Spokesmen for Denizbank, Garanti and Vakif Bank, which is 58.5% owned by the Prime Minister’s Directorate General of Foundations, didn’t immediately respond to requests for comment. A spokesman for Halkbank didn’t immediately return a call seeking comment.

A spokesman for IGA Havalimani Isletmesi, the joint- venture company building the project, declined to comment.