Elizabeth Fournier Staff writer
First, Akbank launched Turkey's first private sector bonds in a $1 billion issue that avoided the country's usual loan participation structure, and planned ahead for an expected change to tax laws.
"Akbank decided to bite the bullet and try a direct issuance, notwithstanding the withholding tax costs," said Simon Porter, who led the deal for Akbank's UK advisers Baker & McKenzie. "The loan participation has become increasingly difficult and expensive since tax regulations changed in Turkey."
To avoid the withholding tax that Turkish law applies to bonds, transactions in the country have traditionally been structured as loan participations. But since 2007 when tax rules were tightened, these have had to be channelled through another bank rather than an offshore special-purpose vehicle (SPV). This has made the process much more costly, and since the financial crisis banks have been less willing to provide the service.
Akbank was encouraged...