Turkey’s Vakifbank begins exchange offer for 6% subordinated notes

By Angela McDaniels

Tacoma, Wash., Jan. 13 – Turkiye Vakiflar Bankasi TAO began an exchange offer and a consent solicitation for its $900 million 6% subordinated notes due 2022, according to an announcement.

The bank is offering dollar-denominated fixed-rate resettable tier 2 notes due Nov. 1, 2027 in exchange for up to $650 million principal amount of the 6% notes.

The new notes will be callable on Nov. 1, 2022.

The coupon on the new notes will be 8% up to but excluding the call date and then the five-year mid-swap rate plus the reset margin, which will be calculated at 11 a.m. ET on Jan. 26 by subtracting the interpolated pricing time mid-swap rate from 8%.

The new notes are being offered for exchange on a par-for-par basis. The bank will also pay accrued interest up to the settlement date, which is expected to be Feb. 13.

Holders must tender at least $200,000 principal amount of notes in order to participate.

The exchange offer will end at 5 p.m. ET on Jan. 25.

Under the current terms and conditions of the 6% notes, the bank cannot purchase 6% notes prior to Dec. 13, 2017, the fifth anniversary of the new issue date. The bank is seeking approval to remove this restriction.

Holders who tender will be deemed to have consented to the change.

Holders who submit consents only without tendering their notes for exchange are eligible to receive a 0.05% consent fee.

The meeting at which noteholders will vote on the proposed change will be held at 5 a.m. London time on Feb. 8.

The bank said it is pursuing the consent solicitation and exchange offer because of a recent change in Turkish law that has resulted in a reduction of its ability to treat all of the 6% notes as Tier 2 capital in the manner contemplated when the notes were first issued. By replacing some of the 6% notes with new notes, the bank will mitigate the impact of this change in law on its Tier 2 capital levels by allowing it to include the new notes in the calculations of its Tier 2 capital.

If the amount of notes tendered for exchange exceeds $650 million, the notes will be accepted for exchange on a pro rata basis.

Whether the issuer will accept any 6% notes for exchange is subject to the success of the consent solicitation.

The exchange offer is not conditional on the issuance of a minimum principal amount of new notes.

The dealer managers are BNP Paribas (+44 20 7595 8668 or liability.management@bnpparibas.com), Citigroup Global Markets Ltd. (+44 20 7986 8969 or liabilitymanagement.europe@citi.com), Merrill Lynch International (+44 20 7996 5420 or DG.LM_EMEA@baml.com) and Standard Chartered Bank (+44 20 7885 5739 or liability_management@sc.com.).

The exchange and tabulation agent is D.F. King Ltd. (+44 20 7920 9700, 800 431-9646, 212 269-5550, +852 3953 7230, vakif@dfkingltd.com/vakif or https://sites.dfkingltd.com/vakif).

Vakifbank is a lender based in Istanbul.

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