CASE STUDY

Helping Turkey Mobilize €500 Million inLong-Term Financing from Commercial
Markets Amid the Crisis
In a time of great financial volatility, a€250 million IBRD Loan Guarantee helped
Turkey raise €500 million in long-term
financing from international markets forstate-owned Türk Eximbank.
The guarantee supported Türk Eximbank in extending
lower-cost, long-term funding to export-oriented small andmedium enterprises (SMEs), which have been severely
affected by the COVID-19 shock and have broadly lostaccess to financing.

BackgroundTurkey’s development goals critically depend on strong
export growth, which requires Turkish export-oriented
enterprises to become more competitive by improving
productivity, expanding product range, and enhancing
product quality to command higher prices in export
markets. Access to long-term finance is critical for
expansion into new markets for Turkish exporters.
Due to the global COVID-19 pandemic, financial andinsurance/reinsurance markets have become lessaccessible and more expensive over 2020-21. Especially for
emerging economies, borrowing costs have spiked, limiting
the ability of Turkish banks to support export-oriented
enterprises. SMEs in Turkey are more vulnerable tofluctuations in the business cycle and are more susceptible
to credit rationing.

Financial Objectives• Unlock capacity for lenders and potential insurers,
particularly reluctant to participate in a context offinancial market uncertainty caused by the pandemic
and macroeconomic volatility.
• Reduce the borrowing cost and extend the maturity
for Türk Eximbank by providing capital relief tolenders under the Basel III framework, with 50% ofloan notional guaranteed by IBRD.

Photo Credit: lotusstock/iStockPhoto• Provide diversification of Türk Eximbank’s funding
program and expand its existing lender pool.
• Support Eximbank improving its yield curve to be able
to access longer term finance in the future without
credit enhancement.

Financial Solution
A €250 million IBRD Partial Credit Guarantee was arranged
to mobilize €500 million of private capital from globallenders. The guarantee assisted Türk Eximbank inachieving a longer maturity and lower all-in cost than wasavailable without a guarantee. The transaction doubled thevolume of financing raised relative to IBRD’s committed
credit exposure and counted against the private capital
mobilization target of the World Bank.
Türk Eximbank is using the financing to extend sub-loans toprivate small and medium-sized (fewer than 250 workers)
and large (250-1000 workers) export-oriented firms.

World Bank’s RoleWorking closely with the World Bank Infrastructure
Finance, and PPPs & Guarantees (IPG) Group, and theFinance, Competitiveness & Innovation Global Practice(FCI), the Treasury team supplied critical capital markets
know-how. IBRD’s Triple-A credit enabled significant
improvement of Türk Eximbank’s borrowing terms, bothcost, and tenor. Specifically, the Bank deal teams engaged
in the following activities:

CASE STUDY
External Evaluation:• Led discussions with over 20 financial institutions,
including the US, European, Asian, and Middle Easternbanks, half of them new to Eximbank’s portfolio oflenders.
• Sounded the private insurance market, touching overtwo dozen risk insurers, either individually or throughan insurance broker.

OutcomeArrangement of the lenders, insurers, and negotiationof terms:• Designed the tender and supported Eximbank infurther refining the transaction parameters and loanstructure.
• Negotiated the most competitive terms with lenders
and insurers in close consultation with Türk Eximbank.
• Secured the support and approval of the Turkish
Treasury to develop and finalize the transaction.
• Facilitated the documentation and execution of thetransaction in the very challenging and tight market,
following Türk Eximbank’s selection of the global
commercial banks

Both tranches achieved significant maturity extensions of
10 years, in a market where Turkish banks typically borrowfrom global lenders at no more than one or two years ofmaturity and primarily in the form of relationship-basedsyndications.

Transaction Structure

The transaction was structured in two tranches. On June 12,2020, Türk Eximbank secured €380 million in long-term
financing from ING, Standard Chartered, and Societé
General against a partial IBRD Guarantee of €190 million.
This was followed a year later by the second tranche of€120 million financing from ING and Deutsche Bank, onMay 25, 2021.

The operation also resulted in a loan facility that provided
1/3 of the cost prevailing in the market for BB-rated Turkey
Eximbank on an unsecured basis.
This transaction was the first of its kind completed with astate-owned Turkish bank and the first IBRD guarantee
project in Turkey.
Summary of Financial Terms
First Tranche

Second Tranche

June 12, 2020

May 25, 2021

Type ofGuarantee

IBRD Partial Credit
Guarantee

IBRD Partial Credit
Guarantee

Coverage

50% of principal atmaturity

50% of principal atmaturity

Amount€190 million€60 millionTerm

10 years

10 yearsGrace period

2 years2 years

Amortizing

Amortizing

Effective DateStructure

Contact: Miguel Navarro-Martin, Manager, Financial Products & Client Solutions, The World Bank Treasury
 mnavarromartin@worldbank.org  +1 (202) 458 4722
1225 Connecticut Avenue NW, Washington, D.C., 20433, U.S.A.