Istanbul Airport Dreamers Set to Land Record Turkish Loan

By Ercan Ersoy and Isobel Finkel

Photographer: Ozan Kose/AFP/Getty Images

Turkish Airlines planes are seen taxiing on the tarmac of the Ataturk Airport in... Read More

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 AS and Turkiye Halk Bankasi AS (HALKB), and another three private lenders are close to agreeing to provide about 4.5 billion euros ($5.5 billion) 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 AS (DENIZ), among the current group of financiers, said on June 17.
A loan that size would surpass the $4.75 billion Ojer Telekomunikasyon AS 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 yesterday. “The fact that six of Turkey’s largest banks committed on this transaction should appease concerns and speculation about the viability of the project.”

Photographer: Kerem Uzel/Bloomberg

Turkish Airlines Chief Executive Temel Kotil said the airport will be one of the... Read More

Mehmet Cengiz, head of Cengiz Holding, said on Nov. 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 U.S. Vice President Joe Biden.

Grace Period

Yapi & Kredi Bankasi AS and Turkiye Garanti Bankasi AS (GARAN) join state-run Turkiye Vakiflar Bankasi TAO (VAKBN) 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 (THYAO) 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 72 million travelers on its two runways in 2013, data from Airports Council International show. Traffic through Istanbul Ataturk Airport, operated by TAV Havalimanlari Holding AS (TAVHL), grew 14 percent last year, climbing to 18th spot with 51 million. Dubai handled 66 million travelers.

Airport Cost

The new airport will eventually cost an estimated 10.3 billion euros, according to Nihat Ozdemir, chairman of Limak Holding AS, among five Turkish construction companies contracted last year to build and operate it. The first phase is designed to handle 90 million 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 22.1 billion euros in fees during the 25 years the airport is projected to operate. It will eventually serve 150 million 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 (YKBNK) declined to comment. Spokesmen for Denizbank, Garanti and Vakif Bank, which is 58.5 percent 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 AS, the joint-venture company building the project, declined to comment.