IFC Launches Bond Program to Expand Turkish Lira Financing for the Private Sector

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The FINANCIAL — IFC, a member of the World Bank Group, introduced an innovative financial instrument to expand the availability of Turkish lira financing, becoming the first multilateral institution to issue lira-denominated discount notes.

IFC issued an inaugural tranche of discount notes in the amount of 100 million lira. The issuance is part of a broader program to regularly issue lira-denominated discount notes and expand the availability of short- term local-currency finance for private enterprises in Turkey. The notes are issued under IFC’s Global Discount Note Program, set up with London Stock Exchange, according to IFC.

IFC issues discount notes in US dollars and CNH, the deliverable form of Chinese renminbi that is traded outside mainland China. IFC is also exploring opportunities to extend the program to other emerging- market currencies where there is demand for short-term local-currency finance.

By setting up the Global Discount Note Program with London Stock Exchange, IFC will strengthen its London presence, promote the development of an offshore market for lira, renminbi and dollar- denominated instruments as well as extend its cooperation with London Stock Exchange Group.

A discount note is a short-term debt obligation issued at a discount to par. Discount notes have maturities of up to one year and are typically issued by government-sponsored agencies or highly rated corporate borrowers.

“Adding Turkish lira as a currency to the IFC discount note program introduces a new asset class for investors seeking high-quality credit, and short-term financing alternatives in the lira market,” said IFC VP and Treasurer Jingdong Hua. “It reflects IFC’s strategy to meet the growing demand for local-currency loans, especially at the short end of the maturity spectrum.”

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IFC support capital market development in Turkey by providing local currency loans—since 2011, IFC has committed 459 million Turkish lira, or approximately $170 million, for private sector investment in the country. IFC also supports Turkish corporates’ entry to the capital markets, participating as an anchor investor in the bond market debuts of Sisecam, a glass and chemicals producer, and Mersin International Port, which issued the first infrastructure bond in Turkey. IFC also supported the first covered bond issuance by a Turkish bank, Sekerbank, to help expand lending to small and medium enterprises.

IFC’s Global Discount Note Program increases its options for funding private sector development in emerging markets. Proceeds of the programs are used in part to fund the Global Trade Liquidity Program, a global initiative to address the shortage of trade finance resulting from the global financial crisis. In FY15 to date, IFC has issued discount notes in the amount of $7 billion. Investors in IFC discount notes include central banks, treasuries, asset managers and corporates.


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