Turkey transfers billions in major company stakes to sovereign wealth fund

By Orhan Coskun

ANKARA (Reuters) - Turkey has transferred government stakes worth billions of dollars in Turkish Airlines, major banks and fixed-line operator Turk Telekom to a sovereign wealth fund set up last year to help finance big-ticket infrastructure projects.

Ankara has ambitious plans for the fund, established last August with initial capital of 50 million lira ($13.6 million). It wants the fund to manage $200 billion in assets as soon as possible, the economy minister has said.

The state's 49.1 percent stake in flag carrier Turkish Airlines - worth roughly $1 billion - and its 51.1 percent of lender Halkbank - worth some $2 billion - have been transferred to the fund, a statement from the government's privatisation administration said on Monday.

Stakes in state-owned Ziraat Bank, the Borsa Istanbul stock exchange and state-owned pipeline operator Botas have also been transferred, according to an announcement in the country's Official Gazette on Sunday.

The sovereign wealth fund will be able to use the stakes as collateral to secure funding for major infrastructure projects, one senior official told Reuters.

"There will be a search for credit abroad to implement very big projects in the period ahead," the official said.

"Turkey's most important companies have been transferred to the sovereign wealth fund. It will be possible to secure credit at low rates for these projects by offering the shares in these companies as a guarantee."

Turkey has embarked on a series of ambitious infrastructure projects under President Tayyip Erdogan, including high-speed railways, suspension bridges and undersea tunnels.

Other planned megaprojects include one of the world's biggest airports in Istanbul and a huge canal that would render a large chunk of the city an island.

The official did not specify which type of projects the wealth fund may help finance.

Once one of the world's most promising emerging markets, investor sentiment towards Turkey has been hit by political uncertainty, insecurity and a tumbling lira currency.

Economic output declined in the third quarter for the first time in seven years, and Erdogan has repeatedly called for cheaper credit to spur growth.

BANK, BOURSE

Other assets moved to the fund include stakes in fixed-line operator Turk Telekom, oil company TPAO, the PTT post office, satellite communications company Turksat, Eti Maden mining company and tea producer Caykur.

Some 3 billion lira of funds under the control of the defence industry support fund will also be transferred, according to the Official Gazette.

Shares in Turkish Airlines were up 1.2 percent after the announcement, while Halkbank shares advanced 2 percent. Turk Telekom shares also strengthened.

The companies would retain their existing management and policies after the asset move, Prime Minister Binali Yildirim's office said in a statement.

"The Turkey wealth fund will manage the companies concerned within the framework of the strategic investment plan approved by the cabinet of ministers," it said.

While sovereign wealth funds are often associated with oil-rich countries such as Norway or Gulf states, Turkey imports almost all of its energy needs. Some economists have said Ankara could better spend the money by paying down a national debt that runs at roughly 30 percent of economic output.

The government has said the fund, while targeting annual growth of 1.5 percent over the next 10 years, will not compromise fiscal discipline.

The fund is headed by Mehmet Bostan, a former finance sector executive who was appointed head of the OIB privatisation board last year. Yigit Bulut, a senior Erdogan adviser, has been appointed to its four-member management board, according to a statement in Turkey's trade registry gazette.

($1 = 3.6757 liras)

(Additional reporting by Behiye Selin Taner and Ceyda Caglayan in Istanbul; Writing by Daren Butler; Editing by David Dolan and Anna Willard)