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Interview of Makram Abboud, CEO Middle East & Africa for VTB Capital plc, for Financial News online (UK)

26 April 2012
VTB Capital first to target Turkish bond investors


Matthew Attwood (Financial News online)

VTB Capital, the Russian bank seeking to expand internationally, intends to increase its presence in the Turkish market after becoming the first non-domestic issuer to launch a Turkish lira-denominated bond to be placed with local investors. 
The bank’s TRY300m ($167.6m) three-year bond, which was launched on Monday, carries a coupon of 11.28% and was managed by Garanti Securities. 
VTB described the exercise as a “landmark deal for both VTB Capital and the Turkish capital markets in general”. Makram Abboud, VTB’s chief executive for the Middle East and Africa and co-head of the bank’s international multi-product structured origination and distribution group, said the issue could presage a greater presence in the Turkish market.
He told Financial News: “As we continue to grow our international presence aggressively, we are evaluating various financing opportunities in the region, and in particularly with Turkey. The proceeds [of the bond] will be utilised accordingly.
“The Turkish market is relatively new for us but we are planning to increase our presence just as we have in other markets. Once the timing is right, we will definitely execute more deals.”
The deal is a potential diversification opportunity for local investors as it is only the second non-sovereign bond in the local market to offer a three-year maturity.
Abboud said the issue satisfied local investors’ appetite for new investment grade issuers offering them diversification and that further deals would follow from issuers outside of Turkey.
“The local capital markets in Turkey are developing and deepening rapidly. This transaction is likely to pave the way for other international institutions considering issuing in the Turkish local markets.”
The market was worth $5.1bn last year, a slightly contraction compared to the $5.5bn of bond supply in 2010, but an improvement on recent history: in 2008 and 2009 supply totalled $3.3bn and $3.9bn. 
But while Abboud predicted that the market would “expand significantly over the years” other debt bankers specialising in helping European issuers to access local currency markets said they were not aware of any plans on the part of their regular clients to access the Turkish investor base.
One syndicate banker said: “It’s true that many European issuers, especially banks, are looking for alternatives to their traditional markets but there are established non-core currency markets they will go to before Turkey.”
The Turkish lira has previously been a staple for top-rated agency issuers such as the European Investment Bank, targeting European investors attracted by the high coupons supplied by volatile interest rate risk.

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