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I AGREE
18 Sep 2009
Milan, September 18, 2009 -- Moody's Investors Service has today changed the outlook on the Ba3
issuer rating of Istanbul Metropolitan Municipality ("Istanbul")
and the Ba3/Baa1.tr issuer ratings of Turkey's Housing Development
Administration (Toplu Konut Idaresi Baskanligi, "TOKI")
to positive from stable. On the global scale, Istanbul and
TOKI are rated in line with Turkish government.
"Today's rating action follows the decision of Moody's Sovereign
Risk Group to change the rating outlook of the Turkish Republic to positive
from stable, which has an impact on the ratings of both Istanbul
and TOKI," says Francesco Soldi, Moody's lead
analyst for Istanbul and TOKI. "Istanbul retains a strategic
role in the national economy, whilst TOKI features close operating
and financial links with the Turkish government due to the nature of its
functions."
Istanbul's Ba3 issuer rating continues to reflect its active fiscal
management and some fiscal flexibility. Moody's recognises
that growing resources and the active management of municipal-related
companies helped Istanbul to manage expenditure pressures and to consolidate
robust operating surpluses. However, these surpluses are
expected to slightly deteriorate going forward, due to the effects
of the economic slowdown on revenue dynamics.
Notwithstanding the large operating surpluses, Moody's notes
that Istanbul's implementation of large infrastructure investments
has led to a fast growing debt burden, in the context of a high
exposure to financial market volatility and fiscal challenges associated
with its large investment requirements. At end-2008,
Istanbul's direct municipal debt amounted to over USD1.5
billion, or 57% of operating revenues (up from 12%
in 2004). Istanbul's debt profile exposes it to liquidity,
interest rate and currency exchange risks; the volatility in financial
market conditions should inspire prudent debt and cash flow management,
particularly when financing cannot be hedged.
TOKI's Ba3 (global scale) and Baa1.tr (Turkish national scale)
issuer ratings also reflect positive financial results, supported
by the substantial expansion of the company's assets. Moody's
understands that proceeds from revenue-sharing projects,
combined with its own cash position and growing use of short-term
liquidity lines from banks, have helped TOKI to manage financing
requirements.
Notwithstanding its positive financial position, the implementation
of TOKI's large capital programme has led to rapidly narrowing liquidity
position and higher-than-expected recourse to domestic borrowing.
As of June 2009, TOKI reported a debt exposure of approximately
TRY2.3 billion (USD1.5 billion). Going forward,
Moody's cautions that TOKI needs to create conditions for consolidating
a regular cash flow profile, with adequate reserves.
The last rating action with respect to Istanbul was implemented on 15
December 2006, when Moody's upgraded the city's issuer
rating to Ba3 from B1. The last rating action with respect to TOKI
was implemented on 18 February 2008, when Moody's assigned
the Ba3/Baa1.tr issuer ratings.
The principal methodologies used in rating Istanbul were "Regional and
Local Governments Outside the US" and "The Application of Joint Default
Analysis to Regional and Local Governments", published respectively
in May 2008 and December 2008. The principal methodology used in
rating TOKI was "The Application of Joint Default Analysis to Government
Related Issuers", published in April 2005. All are available
on www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found in the Rating Methodologies sub-directory on Moody's
website.
Moody's national scale ratings are not globally comparable, but
address credit risk among debt issues or issuers within a country,
enabling participants to better differentiate relative risks. Moody's
issuer ratings are assigned to issuers rather than to specific debt issues.
Specific debt issues of the issuer may be rated differently, and
are considered unrated unless individually rated by Moody's.
Milan
Francesco Soldi
Asst Vice President - Analyst
International Public Finance
Moody's Investors Service
Telephone:+39-02-9148-1100
London
Yves Lemay
Managing Director
International Public Finance
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's changes outlook to positive on Istanbul and TOKI following sovereign action
No Related Data.
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