Turkey is selling licenses to operate infrastructure to the Australia's second-largest investment company...

B&B plans $1b Turkey fund
May 28, 2008 - 7:47AM

Turkey is selling licenses to operate infrastructure, including ports and roads, as part of an International Monetary Fund-backed program of disposals to reduce budget deficits and debt, and curb the state's role in the economy.

Babcock & Brown, Australia's second-largest investment company, plans to raise more than $US1 billion ($A1.04 billion) for a fund to invest in Turkish infrastructure as the government steps up asset sales, two people with knowledge of the matter said.

Babcock is approaching investors and will target assets such as airports, roads, utilities and ports, said the people, who declined to be identified because the plans are private.

The Sydney-based firm expects to finish raising the money for the closely-held fund next year, they said.

Turkey is selling licenses to operate infrastructure, including ports and roads, as part of an International Monetary Fund-backed program of disposals to reduce budget deficits and debt, and curb the state's role in the economy.

Babcock earns about 36% of its revenue in Europe and in 2006 bought a 5.2% stake in TAV Havalimanlari Holding AS, which runs Istanbul's Ataturk Airport.`

`There is a bigger pipeline of infrastructure deals that may come to fruition in Turkey than anywhere else in Europe,'' said David Simpson, head of infrastructure mergers and acquisitions at KPMG International in London. With greater competition for assets, investors should expect lower fund returns than in the past few years, he said.Babcock oversaw $72 billion of assets at the end of 2007, including $41 billion in publicly traded funds and $15 billion in closely-held investment vehicles.

Sydney-based Macquarie Group Ltd., Babcock's larger competitor, has $232 billion under management.Anthony Kennaway, a London-based spokesman for Babcock, declined to comment on the new fund.Macquarie, CitigroupBabcock has declined 54% this year, compared with a 23% drop in the 50-member S&P/ASX 200 Finance Index.

The firm said last week it may help Babcock & Brown Power, Australia's biggest publicly traded electricity producer, with financing if the company fails to secure additional debt funding from banks. Babcock & Brown in the second-biggest shareholder in the power company after Deutsche Bank AG.Investment firms are targeting stable returns from infrastructure investments in Europe.

Macquarie is seeking to raise more than 5 billion euros ($8.2 billion) for its third European infrastructure fund, four people with knowledge of the matter said April 10. The firm will use the money to buy assets across the continent.New York-based Citigroup Inc., the largest US bank by assets, is seeking as much as $US5 billion for its first infrastructure fund as the company targets utility and airport assets, three people with knowledge of the plan said last month.

Pressing AheadCredit Suisse Group, Goldman Sachs Group Inc. and UBS AG are among banks that started such funds in the past two years as the pace of infrastructure mergers almost doubled to $US340 billion between 2005 and 2007, according to data compiled by Bloomberg.

The head of Turkey's state asset sales agency, Metin Kilci, expects to invite bids for the national lottery and a network of bridges and roads at the end of this month or early in June, he said on May 16. Turkey is pressing on with asset sales, even as global credit markets dry up, to lure foreign currency and narrow a widening trade deficit.Legal challenges have delayed some asset sales, adding to the ``risk factor'' for companies wanting to invest in Turkey, Kilci said.

The payment of $US1.28 billion from the sale of Izmir port to Hong Kong-based Hutchison Whampoa, the world's biggest port manager, and Global Yatirim Holding AS hinges on a court ruling and is likely to be made before the end of the year, Kilci said.The government sold 15% of Turk Telekomunikasyon AS, the main fixed-line telephone company, for $US1.9 billion this month in the nation's biggest initial public offering. Tenders to sell four electricity distributors have been started.Bloomberg

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