ANKARA: Istanbul is in talks to borrow in international markets to finance ongoing rail projects, two bankers with knowledge of the matter told Reuters on Thursday (Nov 14), as the city's new mayor kicked off meetings with investors in London.
Mayor Ekrem Imamoglu is on a three-day London visit to meet officials and investors and, according to the bankers, to consider financing options for underground metro and railway projects.
An emerging leader of Turkey's main opposition Republican People's Party (CHP), Imamoglu was elected in a June re-run vote that shocked President Tayyip Erdogan's ruling party.
"The municipality is conducting talks for financing construction of railway systems," a London-based banker said, adding there was not yet a eurobond borrowing mandate since development agencies offer reasonable borrowing options.
"Talks will start tomorrow and we can see different borrowing types according to investor demand," the banker said.
The city of Istanbul, home to one-fifth of Turkey's 82 million people, would likely need the Treasury's backing to issue eurobonds. Due to increased costs of seeking funding without federal backing, municipalities often prefer to borrow from development agencies or seek project-based financing.
"The talks are conducted on a minimum amount of US$500 million with minimum five-year maturity," another banker said. "It does not seem like there is a eurobond issue at the mandate level."
Imamoglu is scheduled from Nov 13-15 to meet officials in London from Goldman Sachs, JPMorgan, Morgan Stanley, Citigroup, Credit Suisse, HSBC, Barclays, KKR, 3i, BlackRock and Blackstone, among other banks and firms, the municipality said.
Speaking on the sidelines of his London visit, Imamoglu said the funding amount and exact structure had not been determined yet.
"We don’t have a detailed plan based on a concrete budget at the moment, we’re not working on exact numbers," he told Reuters. "What we’re doing is a technical dialogue and our technical colleagues will continue this dialogue."
In the last week, the French Development Agency (AFD) signed an 86 million euro (US$95 million) loan agreement with Istanbul for construction of an underground metro line, it said on Twitter.
Imamoglu, seen by some as a presidential contender for the secularist CHP, has also visited Paris and Berlin to meet his counterparts, investors and Turks abroad. In Berlin last weekend he was filmed shaking hands and dining in a Turkish restaurant.
"It's the first time that I have seen an opposition mayor hold such widespread investor meetings," said a third banker in London who requested anonymity, adding Imamoglu is expected to continue his European tour.
"He will listen to their ideas and get acquainted with financial markets," the banker said of the London trip. "The visits are an important step if he is planning to advance in politics beyond the mayoralty."
Turkey's Treasury-backed foreign debt stock stood at US$14.7 billion at the end of the second quarter. Treasury-guaranteed issues by municipalities have not been done since 2010, according to Treasury data.
So far this year Istanbul has secured US$115 million in financing from Societe Generale, US$86.2 million from Black Sea Trade and Development Bank and US$108.4 million from the European Bank for Reconstruction and Development (EBRD).