Mersin Port: Troubled berth

Of all the recent Turkish privatizations Mersin faced the largest number of threats of complete collapse and it is a credit to the sponsors and arrangers that the deal actually got done.

Lead arranged by ABN Amro, Garantibank, GE, Isbank, TSKB and UniCredit/HVB, only HVB went the distance from the original arranger line up which fell apart when Citi and SG pulled out over concerns about some of the default terms of the 36-year concession.

PSA Corporation and Akfen Holdings were appointed preferred bidders for the concession in 2005 with a bid of $755 million. The port was formerly operated by Turkish State Railways (TCDD), and the transfer of operations took place on 12 May 2007 after a host of legal hurdles.

Under the Turkish port privatisation program no operator can hold two complimentary concessions so that competition between ports that are next to each other is kept strong. PSA, also has the concession for the next port along the coast at Iskenderun and consequently the Mersin award was challenged in the courts.

The situation was further muddled because the runner-up in the Mersin bid, and therefore the next winner if the competition board had not favoured PSA, was Dubai Ports, which had also won the Izmir concession. Consequently no bid could go to financing until a decision on one of them was made.

Eight banks joined syndication of the $600 million debt which priced at 250bp rising to 300bp over the 13.2-year tenor.

Mersin Port
Status: Syndication close 19 September 2007
Description: Turkish port privatization facility
Sponsors: PSA Corp, Akfen Holding
Mandated lead arrangers: ABN Amro (bookrunner), Garantibank, GE, Isbank, TSKB and UniCredit/HVB (bookrunner and documentation agent)
Participants: Banco Espirito Santo, Denizbank, Fortis, Hypo Public Finance Bank, KfW, Arab Banking Corporation, EFG Bank, KBC
Legal counsel to borrowers: Clifford Chance
Legal counsel to lenders: Allen & Overy