Paksoy Law Firm prepared a client briefing describing the details of Turkish covered bonds. If you have questions about the content, please contact the lawyers below;
Although Turkish law has had a framework for covered bonds since 2007, the markets first saw a covered bond transaction in 2011 when the mid-sized lender Sekerbank established € 335 million covered bond programme and placed the offering with UniCredit, IFC and the Dutch development agency, FMO. This programme was an uncommon structure where the bonds were secured by short-term SME loans ring-fenced for the benefit of investors.
Now, as the Turkish market continues to grow, Turkish issuers are keen to diversify their funding portfolio through euro denominated covered bonds, especially since Akbank, VakifBank and Garanti Bank established covered bond programmes this year, partly due to the following key changes made to secondary legislation in January 2014:
- The 15% restriction for inclusion of derivative transactions in the cover pool is no longer required - the entire amount of receivables from derivative transactions now meets the eligibility criteria to be added in the cover pool, which gives the opportunity to increase the amount of eligible collateral and the size of the cover pool;
- The 15% restriction for swap counterparty claims against issuers has been removed - now all obligations of the swap counterparties can be secured by the cover pool; and
- An occupancy certificate (iskan ruhsatı) is no longer required - issuers can collateralise their programmes with mortgage loans that do not have an occupancy certificate, which gives the opportunity to increase the value of mortgage secured receivables, and thus, also the amount of the eligible collateral and the size of the cover pool.
You may read the full briefing here.