Turkey wealth fund hires banks for 1b euro loan: sources

[ISTANBUL] Turkey's largely dormant sovereign wealth fund hired Citigroup Inc and Industrial Commercial Bank of China Ltd to act as coordinators for a one billion euro (S$1.5 billion) syndicated loan, according to five people with knowledge of the matter.

The facility will have a maturity of two years with an option to extend for another year so that Turkiye Varlik Fonu, or TWF, can inject cash into the companies it holds, one of the people said, asking not to identified. The transaction will mark the first time the fund taps international markets for debt.

TWF's foray into the loan market comes amid a rally across emerging markets that has helped stabilise the Turkish currency. Treasury and Finance Minister Berat Albayrak on Wednesday said the fund had taken "big steps to enlarge its balance sheet and transparency", BloombergHT television reported. The TWF was founded in 2016.

While it's unusual for a sovereign fund to borrow - they're typically established to deploy a nation's accumulated wealth, there is a recent precedent. Saudi Arabia's fund last year signed an US$11 billion loan with some of the world's biggest global banks, including Goldman Sachs Group, HSBC Holdings and JPMorgan Chase & Co. It was priced at 75 basis points over Libor, according to people familiar with the terms at the time.

Expressing frustration with a lack of developments at the Turkish fund, President Recep Tayyip Erdogan overhauled its management and named himself chairman last year. He did so after being sworn in with additional powers under an executive presidential system he introduced.

Representatives for Citigroup, ICBC and TWF declined to comment.

BLOOMBERG