ISTANBUL Turkey completed its biggest ever share sale on Monday, raising 4.5 billion lira ($2.5 billion) from a stake in state-controlled lender Halkbank and showing a shift in its privatization strategy is starting to bear fruit.
Turkey sold a 24 percent stake in Halkbank (HALKB.IS) at 15.1 lira per share, in the top half of the offer range of 13.80-15.90 lira and signaling strong investor interest in an economy still growing healthily in a uncertain global backdrop.
Disappointing privatization receipts have put pressure on government finances in recent years, with high valuations and tough funding conditions due to the euro zone debt crisis forcing the postponement of several tenders.
The Halkbank sale, the third-biggest share sale in Europe this year, is the first successful privatization since Finance Minister Mehmet Simsek told Reuters in September that the government was modifying its strategy to include secondary public offerings and to focus on raising revenue.
"(The Halkbank offer) shows that Turkey is capable of attracting funds in a global crisis environment," said Ozgur Yurtdasseven, a research manager at Garanti Securities.
"This is also due to the positive expectations regarding the Turkish economy as it is close to getting a second credit rating upgrade," he said.
Turkey regained an investment grade credit rating from Fitch on November 5 in a move long coveted by Ankara, endorsing an economic transformation achieved in the past decade under Prime Minister Tayyip Erdogan.
It is hoping one of the two other major rating agencies - Moody's or Standard & Poors - will follow suit, which could enable it to join benchmark investment grade bond indexes, a status many funds require before investing.
"The confidence of national and international investors in our country has played an important role in this success ... The timing was very good," Simsek said on Monday, adding total bids in the share sale had totalled 11 billion lira.
Turkey, whose budget deficit is expected to exceed the government's 2.3 percent forecast this year, will use the proceeds to pay down its debt, Simsek said.
IRAN DEALS IN FOCUS
Halkbank has 102 billion lira in assets and is Turkey's second-largest state lender, with a market capitalization of 19.9 billion lira. It controls around 10 percent of Turkey's banking sector deposits.
Its transactions with Iran came into focus last year, because of U.S. sanctions aimed at helping to stem the flow of oil revenue and persuading Tehran to abandon a suspected nuclear weapons program.
Halkbank has repeatedly said its customers' oil payments to Iran comply with international regulations, a sentiment echoed by the head of Turkey's banking watchdog on Monday.
Following the sale, Turkey's share in Halkbank fell to 51 percent from a previous 75 percent while the free float rose to around 49 percent from 25 percent.
The Halkbank sale follows Italian lender UniCredit's (CRDI.MI) $9.9 billion rights issue in January and Russia's sale of a $5 billion stake in Sberbank (SBER.MM) in September.
Turkey raised $1.85 billion with the sale of a 25 percent stake in Halkbank in an initial public offering in 2007.
Turkey's previous largest share sale was an initial public offering of a 15 percent stake in fixed-line phone company Turk Telekom in 2008, which raised $1.9 billion.
Istanbul's main share index .XU100 has rallied 40 percent since the start of 2012. Turkish banking shares .XBANK have risen 52 percent over the same period.
Trading of Halkbank shares was suspended on November 12 until November 21.
($1 = 1.8005 Turkish liras)
(Additional reporting by Orhan Coskun; Editing by Nick Tattersall, Tom Pfeiffer and Mark Potter)