1. Comparison of Financing Options
(Based on WB market soundings through October 2013)
Summary: A WB Partial Credit Guarantee (PCG) would raise US$500mn compared to only US$300mn by a
Line of Credit (LoC), mobilizing resources beyond the IBRD lending while achieving better average maturity
and similar or better all-in costs for HalkBank. Ultimately, the PCG allows reaching more exporters at the same
market terms and represents a new, innovative and replicable approach in Access to Finance.
Symmetric Comparison, based on achieving a US$500mn intervention
This comparison examines options that would allow HalkBank to raise US$500mn using a combination of
IBRD instruments and/or market-based financing sources. The IBRD PCG is the best option in terms of all-in
cost and average maturity when compared to a stand-alone market loan, or a combination of a market loan and
an IBRD LoC. Notably, the non-PCG options are hypothetical scenarios as currently HalkBank would find it
difficult to access commercial loans without credit enhancement for more than a 1-year tenor.
Asymmetric Comparison, based on utilizing a US$300mn IBRD operation
This presents a strict comparison between US$300mn IBRD operation used for a LoC versus a PCG. Both
instruments would be subject to the same counter-guarantee charge by the Turkish Treasury. However, the PCG
would raise a considerably higher amount (leveraging the limited IBRD funding resources at a ratio of almost
1:2) and at a longer average maturity, although at a slightly higher all-in cost to HalkBank. The higher amount
will help reach more exporters at the required maturity and at market rates, while keeping the all-in cost at a
level that does not adversely affect HalkBank’s cost recovery over time.
Table: Comparison of Financing Options
1
Symmetric
Comparison [1]
Asymmetric
Comparison [1]
Counter-Guar.
Comparison [3]
Stand-alone
Market
Loan
IBRD LoC
and
Market
Loan
IBRD PCG
Supported
Commercial
Financing
IBRD LoC IBRD PCG
Supported
Commercial
Financing
IBRD PCG
Supported
Commercial
Financing
TU Treasury
IBRD lending or
guarantee - US$300mn US$300mn US$300mn US$300mn
TU Treasury counter-guarantee
US$300mn US$400mn US$300mn US$400mn US$300mn
TU Treasury charge - 0.11% 0.11% 0.11% 0.11% 0.11%
HalkBank
Total amount raised US$500mn US$300mn US$500mn US$500mn
o/w
Market loan US$500mn US$200mn US$500mn - US$500mn US$500mn
IBRD loan/ PCG - US$300mn US$300mn US$300mn US$300mn US$300mn
Average maturity (yrs) 7 7.5 9 7.75 9 8
All-in cost [2] 6.34% 4.80% 4.34% 3.83% 4.34% 4.61%
[1] Asymmetric comparison refers to the financing raised using the same IBRD exposure of US$300mn. Symmetric
comparison refers to combinations of IBRD and/or commercial sources that raise US$500mn.
[2] The pricing is based on market soundings that the World Bank conducted through October 2013 and is subject to change.
The pricing assumes a fixed interest as requested by HalkBank.
[3] The last column presents for comparison a US$300mn only counter-guarantee by the TU Treasury. The Symmetric and
Asymmetric PCG scenarios require a counter-guarantee of US$400mn from the TU Treasury, even though this would not
change the use of only US$300mn lending or guarantee operation by the World Bank in PV.
Explanation of the Counter-Guarantee Comparison
IBRD's available guarantee amount is always measured in Present Value (PV) terms, which in these scenarios is
defined as US$300 million. However, the available exposure to lenders (beneficiaries of the guarantee in the
default scenario) can be "stretched” into a greater level of coverage. The potential future guarantee coverage

2. feasible in nominal terms is estimated at US$400mn, even though the operation would still account for only
US$300mn in PV. There is a clear trade-off between the all-in-costs and the counter-guarantee amount. The
Turkish Treasury would need to approve not only the PV of the operation, but also indemnify (or counter-guarantee)
2
the full nominal amount.
Recent Experience from the Region
The lesson from recent PCG operations in South-East Europe is that commercial banks appreciate flexibility in
terms of defining the PCG amount and structure. Some banks place more value on the relative amount of PCG
coverage (i.e. the higher the % coverage, the lower the price), whereas other banks can derive more value from
the PCG in extending the tenor (e.g. a bank could extend a tenor of 10 years to 12 years with only a modest
pricing increase) or leveraging a greater amount of unguaranteed financing (e.g. a bank could price a leverage
ratio of 2.5x close to 2.0x). In other words, the PCG can offer the client a unique opportunity to push the
available financing tenor or increase the amount of financing leveraged for a price that may be even more
attractive in comparison to the relevant stand-alone benchmarks.
Additional Parameters for Consideration
- The proposed PCG-supported transaction has the potential to enhance HalkBank’s financing base, diversify its
funding sources, and reduce the need to resort to currently expensive bond market funding for longer maturities.
- The completion of a PCG transaction could, over time, lead lenders to stretch uncovered loans to maturities
previously not considered, benefiting the banking sector and enterprises overall.
- Under a PCG, IBRD administrative requirements are lighter. Financial management compliance requirements
are restricted to the use of funds, and procurement guidelines do not apply.
Attachments
Excel file of all calculations presented