WHAT ARE THE ADVANTAGES OF USING TURKEY AS A GLOBAL INVESTMENT PLATFORM?
TURKEY lies at a strategic crossroad, not only in the geographical sense, but also in terms of the global economy. The most promising advantage that Turkey presents to investors is its potential for future growth based on its demographics, particularly its young and growing population.
Turkey was not as adversely affected by the recent economic crises, and its recovery was faster than certain other markets. Turkey’s GDP growth since the end of 2009 has been strong: 9.0% in 2010 and 7.5% in the first six months of 2011 – an upwards trend which is expected to continue. Published targets for 2011–2013 indicate that Turkey is projected to grow at a higher rate compared to the OECD average and EU countries individually.
Another factor fuelling the potential of Turkey is the steps it has taken to encourage foreign investment and to develop the regulations affecting Turkish companies. The foreign investment regime that sets foreign and domestic investors on equal footing has been in place for some time now, and the implementations of the new Turkish Code of Obligations and the new Turkish Commercial Code in July 2012 will be a significant milestone. The new Turkish Commercial Code in particular is expected to have a major positive impact on Turkish corporations and shareholders in terms of governance and other matters.
WHAT STEPS HAS THE CAPITAL MARKETS BOARD OF TURKEY (CMB) RECENTLY MADE TO INCENTIVIZE INVESTMENT INTO THE TURKISH CAPITAL MARKETS?
The Turkish capital markets legislation also continues to evolve in ways that bring substantive benefits to companies and investors. The CMB and the Istanbul Stock Exchange (ISE) have recently undertaken major campaigns to encourage small and mid-size companies, as well as larger companies, to offer their shares to the public. They also have sought to make investing in Turkish companies more attractive to both domestic
and international investors.
In 2009, the CMB updated its regulations on debt securities and published new regulations affecting mandatory tender offers. Furthermore, in 2010 the CMB revised its framework on equity sales and offerings; changes included abolishing the minimum public offering percentage and the obligation to underwrite deals. Other significant updates and new regulations in the last few years include the communiqué on the issuance and sale of securities by foreign entities in Turkey, the introduction of new regulations regarding warrants, mortgage and asset covered bonds, and the regulation of new markets such as leveraged derivatives.
In addition to enhancing the regulations affecting companies seeking to raise funds, the CMB has also focused on raising the level of play of listed companies. Most notably, the CMB has made significant changes to the disclosure regime applicable to listed companies, implementing disclosure obligations that more closely reflect those applicable in European markets; this enhances the quality of the disclosure available to investors. The launch of the ISE’s Public Disclosure Platform in 2009 enabled public disclosures to be transmitted directly to an easily accessible on-line system, making disclosure available to investors on a real time basis. The CMB also continues to develop its corporate governance regulations, an important area of focus for international investors.
A similar change is ongoing with respect to the organized exchanges, especially the Istanbul Stock Exchange and the Turkish Derivatives Exchange in Izmir, where new markets and indices are being introduced and the scope of trading instruments is being expanded.
HOW SUCCESSFUL HAS THE COUNTRY BEEN IN BROADENING ITS CAPITAL MARKETS OFFERING?
The number of equity and debt offerings in Turkey has increased, in part due to the changes mentioned above but primarily as a result of economic growth in Turkey, which generally surpassed the European and global averages for recent periods. Interestingly, there has been an increase in purely domestic offerings, reflecting the impact of the global economic environment on international investors.
According to ISE figures, there were 22 and 25 equity public offerings in 2010 and 2011 (to date) respectively, compared to 2 and 1 in 2008 and 2009. The increase in debt issuance is even more significant: 62 out of 66 debt
public offerings since the end of 2005 took place in the last two years, 15 of them in 2010 and 47 in 2011. A similar trend can be seen in the data made available by the CMB, where the value of all capital markets instruments registered with the CMB in 2011 (to date) was more than three times the total value as of the end of 2010.
The share of foreign investors in the equity markets of the ISE has remained relatively stable. According to the Central Registry Agency, foreign investors held more than 60% of the shares traded on the ISE between 2005 and 2011 (in terms of market value). This rate increased to over 70% in 2007 and 2008 but later dropped and currently the share of foreign investors hovers around 62%.
Debt offerings became an attractive alternative in 2010 and 2011, including plain corporate bonds, high yield bonds, LPN and Eurobond issuances by Turkish companies and banks.
Another interesting trend has been the interest shown by foreign issuers in making direct issuances into Turkey. DO & CO’s secondary listing on the ISE was a first for a non-Turkish issuer, and Deutsche Bank’s warrant issuance in 2010 was the first warrant issuance in Turkey.
HOW BENEFICIAL IS IT FOR CLIENTS TO INSTRUCT A GLOBAL FIRM LIKE WHITE & CASE IN THIS AREA?
We are the firm of choice in Turkey based on our 30 years of experience in the market, our track record of executing “firsts” in Turkey, and our integrated and efficient approach in combining domestic and international expertise. Our team includes highly experienced lawyers who work together regularly on Turkish capital markets matters, which adds significant value for clients.
We have been, and continue to be, the most active law firm in Turkey advising issuers and underwriters on IPOs and are consistently ranked in the first tier by independent commentators. We have been involved in a number of ground-breaking deals across a range of industry sectors: We were involved in the first international IPO of a Turkish company (Teleta¸s in 1988), and to date we have represented issuers and underwriters in more than 50 Turkish equity and debt offerings. Since 2005, we have advised on 8 out of the largest 11 IPOs in Turkey, including Türk Telekom, Coca-Cola ?çecek, Vak?fbank, Emlak Konut GYO, Koza Alt?n, Sinpa¸s GYO, Torunlar GYO and Bizim Toptan – the total proceeds from these deals exceeded $5.5 billion.
In addition to IPOs, we have been involved in secondary offerings, plain debt, high yield, LPN, warrant issuances and structured products, among others. Recently, we represented our clients in the first equity issuance and secondary listing by a foreign issuer in Turkey, the first high yield bond offering by a Turkish issuer in over 15 years, the first debt issuance by a foreign issuer in Turkey and the first covered warrant issuance.
About the authors:
Laura Sizemore is a capital markets partner in the Istanbul and New York offices of White & Case LLP. She represents issuers, underwriters and other participants in global offerings under Rule 144A/Regulation S as well as US registered public offerings. She has extensive experience in emerging markets securities offerings, including listings on one or more securities exchanges. She has been involved in Turkish capital markets transactions since 2004. She also advises US registered companies with respect to their disclosure and other compliance obligations under US federal securities laws. Ms. Sizemore received a J.D./LL.M. with honors from Duke University Law School and is a member of the New York Bar Association.
White & Case LLP
Tel : +90 212 275 7533
lsizemore@whitecase.com
www.whitecase.com
Meltem Akol is a partner in Akol Law Office, the Turkish affiliate of White & Case LLP. Ms. Akol’s practice concentrates on capital markets, cross border mergers and acquisitions and joint ventures and private equity transactions. In the capital markets law area, Meltem Akol has worked on equity and debt offerings by Turkish and foreign issuers as well as advising on a wide range of transactions. Ms. Akol received an LL.M. from Harvard Law School and is a member of the Istanbul Bar.
Akol Law Office
Tel: +90 212 355 1300
makol@akol.av.tr
www.akol.av.tr
