Less cold on Turkey

In finance as in politics, finding the right partners is rarely a done deal. Turkey is currently learning it the hard way: three weeks after surprise election results put an end to more than a decade of single-party dominance by the Justice and Development Party (AKP), the country’s political factions are engaged in frantic negotiations to try and form a viable coalition government.

After a few years that saw Turkey’s economy dip and its government become increasingly authoritarian, the outcome was welcomed by many. But it still introduces a fair amount of political volatility that doesn’t always chime well with international investors’ preference for long-term visibility.

And yet some are no longer afraid to make a splash in the country. Late last month, a €1.12 billion financing package was unveiled for the Etlik hospital campus, in Ankara, involving a €125 million loan from the European Bank for Reconstruction and Development (EBRD) as well as debt from Deutsche Bank, Credit Agricole, Unicredit, Banca IMI, the International Finance Corporation (IFC), The Black Sea Trade and Development Bank, Germany’s DEG and local banks Isbank, Turkiye Sinai Kalkinma Bankasi and Akbank.

The buildings, which will be built, equipped and managed by a consortium comprising Italian developer Astaldi and Turkish construction firm Turkerler, is to be leased to the Turkish government for a period of 27.5 years. The project is the latest public-private partnership (PPP) to be financed under the government’s €12 billion programme to build and expand around 60 hospitals around the country, all of which have so far involved debt and equity providers from overseas.

Last December, the Adana Integrated Healthcare Campus closed with €550 million of financing garnered from the EBRD, IFC and a group of international commercial lenders. The transaction saw French-based fund manager Meridiam, which owns a 40 percent stake in the project alongside local partners, become the first overseas-based global investor to complete a deal in the Turkish PPP market.

Financial close was achieved the same month on the Mersin Health Campus, a project backed by Dubai-based construction group DIA Holdings. The company followed on by closing the Bilkent Integrated Healthcare Campus PPP last March with a total €1.2 billion of funding, including €890 million of long-term debt from Germany’s Siemens Financial Services, Italy’s UniCredit and Turkish banks. “Ankara Bilkent is setting a benchmark for the levels of funding that PPP models can achieve,” said at the time Anthony Casciano, chief executive officer of healthcare finance at Siemens Financial Services.

But perhaps the most telling landmark was that crossed by Meridiam and local developer Rönesans Holding at the beginning of June, when the pair managed to secure the long-term financing needed to carry out the Yozgat Education and Research Hospital Project solely from international commercial lenders – including an 18-year senior loan of €110 million. Yozgat stands to become the first hospital PPP to start operations in the country.

The early momentum gathered by Turkey’s healthcare programme coincides with ambitious privately backed schemes in other sectors of its economy. Last month, Deutsche Bank and eight Turkish lenders came up with a $4.96 billion facility to undertake the Phase II B of the Gebze-Orhangazi-Izmir motorway and refinance previous phases of the €7.2 billion PPP – the largest infrastructure project ever financed under Turkey’s build-operate-transfer law.

The World Bank recently recognised Turkey’s efforts by ranking it second in the latest instalment of its Private Participation in Infrastructure Database, underlining large-scale privatisations in the energy sector as well as sizeable transport deals. While partnerships still take time to seal, all this amounts to a clear vote of confidence by the investor community for the country’s long-term prospects.