Port of Mersin Concession

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In August 2005, the Turkish privatization administration granted a 36-year concession to operate Port of Mersin to Mersin International Port Management, a joint venture comprised of Singapore's PSA and Turkey's Afken Holding. Port of Mersin was owned by the Turkish State Railways company TCDD. The Mersin Port had 23 piers in docks built in a total port area of 786,000 sq m. The port was one of the most important ports in the eastern Mediterranean with a total capacity of 3,800 ships a year. Izmir and Mersin are the two largest ports in Turkey in terms of the total volume of cargo handled as well as the total amount of containers handled. Mersin, which was previously run by the Turkish state railway, had annual capacity of 800,000 TEUs. Akfen Holding was a construction company while Singapore-based PSA was a global ports operator. There was no public information in the ownership structure of the consortium. The concession contract was granted through a competitive tender. The PSA Afken consortium won the bid by offering the highest concessions fees, $755 million. The Dubai Port Authority made the second highest offer of $750 million. The proceeds from the tender were to be paid to TCDD. In addition to concession fees, the PSA and Afken consortium committed to invest between US$70 million to US$$100 million in the first five months of port operations. At the time of financial closure, commitments of addtion investments in the concession were US$121 million. The concession contract was signed in 12 May 2007 and was to last until 2043. The transfer of operations took place the same day. It took almost two years for the contract signing due to legal problems with the tender. Under the Turkish port privatization 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. Earlier, the transfer of the port was blocked when the workers’ union Liman-Is filed four lawsuits against the privatization. In November 2006, the council of state’s 13th chamber rejected the appeals against the concession and removed obstacles before the transfer of the port. Syndication closed on 19 September 2007. Eight banks joined syndication of the $600 million debt which priced at 250bp rising to 300bp over the 13.2-year tenor. 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. In 2013, the sponsors closed the original $600 million debt financing for the acquisition of the port in September 2007. Akfen Holding and PSA International have launched the $450 million bond refinancing of Mersin Port. Citi, DBS Bank and UniCredit are leading the dollar-denominated 144A issue and are holding roadshows with investors in Singapore, Hong Kong, London, Boston and New York until 31 July 2013.

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