Turkey’s Ziraat Bank secures $1.24 billion loan at higher cost

Ziraat Bank, Turkey’s biggest state-run bank, secured a syndicated loan of $1.24 billion at higher costs following a currency crisis and the outbreak of the war in Ukraine.

The bank borrowed the money in tranches of $352.5 million at 275 basis points, or 2.75 percentage points, above the secured overnight funding rate (SOFR) and 814 million euros ($885.9 million) at Euribor plus 210 basis points.

The loan, obtained with the contribution of 45 banks from 21 countries, will be used in line with environmental sustainability criteria to finance foreign trade, the bank said in a statement to the Istanbul Stock Exchange on Monday.

Turkish banks were borrowing at interest margins of less than 100 basis points above dollar and euro benchmarks in 2018 prior to currency turmoil, which first broke out in August 2018, and the COVID-19 pandemic. The latter prompted the government to adopt unorthodox economic and monetary policies to boost growth, including ordering the central bank to cut interest rates despite surging inflation.

Ziraat Bank is controlled by Turkey’s sovereign wealth fund, along with the two other largest state-run banks. In February, the wealth fund injected $1.6 billion of capital into the bank to boost its finances and to improve its capacity to lend ahead of elections due to be held by June next year.

Turkey's government has also used state-run banks to help prop up the lira, which lost 44 percent of its value in 2021.

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