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Rating Action:

Moody's reviews Global Liman's ratings for downgrade

17 Dec 2019

London, 17 December 2019 -- Moody's Investors Service (Moody's) has today placed on review for downgrade the B2 corporate family rating (CFR) and the B2-PD probability of default rating of Global Liman Isletmeleri A.S. (Global Liman), a Turkey-based port operator owned by Global Ports Holding PLC (GPH). Moody's has also placed on review for downgrade the B2 instrument rating on the USD250 million senior unsecured notes due 2021 issued by the company.

RATINGS RATIONALE

Today's rating action follows publication of the 9M 2019 results, which indicate a deterioration in Global Liman's earnings primarily due to the significant decline in throughput in the commercial segment, with container volumes down 15% and general cargo volumes down 50% in the nine months to September 2019. While some of the deterioration in volumes has been offset by other revenue initiatives and growth in the cruise segment, the company's cash flow has weakened, with reported EBITDA falling by 7% to USD64 million for the nine months ending September 2019.

Given reduction in earnings, which was greater than previously anticipated by Moody's, Global Liman's credit metrics are likely to weaken to the levels that would no longer be commensurate with the B2 ratings, with uncertainty around the recovery in the company's financial profile over the medium term and ahead of its bond maturity in 2021. In this context, further pressure on Global Liman's credit quality comes from the acquisitive strategy of the wider GPH group and the expected increase in the group's debt as a result of the recently completed acquisitions in the cruise segment -- Nassau and Antigua.

GPH's strategic objective is to focus on the cruise segment, with the company considering the sale of certain assets owned by Global Liman. The sale of any part of the business would result in a material shift in the group's business risk profile. Under the terms of the debt documentation, it would also likely result in a pre-payment of the notes issued by Global Liman. Moody's understands that the strategic review will continue into early 2020, although there is uncertainty as to the final outcome and its timing.

Global Liman's current B2 CFR positively reflects (1) the degree of business and geographical diversification of the port operations, (2) strong profitability of the existing ports, with EBITDA margins at around 60-70%, and (3) the limited capital expenditure requirements associated with the existing ports. The rating is, however, constrained by (1) the company's exposure to throughput variation, with volumes affected by trade wars and geopolitical situation in the region, (2) a significant contribution to cash flow from Turkish operations, which are exposed to weak economic conditions, (3) high financial leverage, (4) a significant presence of minority shareholders resulting in cash flow leakage, and (5) the acquisitive nature of the wider GPH group.

RATING OUTLOOK

The B2 ratings are on review for downgrade, reflecting the risks associated with the deterioration of Global Liman's cash flow coupled with high leverage in the context of the company's upcoming debt maturities. As part of the review process, Moody's will consider (1) the company's expected credit metrics over the short to medium term; (2) Global Liman's strategy for the refinancing of the USD250 million senior unsecured notes, as well as (3) the notching differential between the CFR and the instrument rating, given weaker cash flows from the Turkish ports and their fairly short remaining concession life.

WHAT COULD CHANGE THE RATING -- UP/ DOWN

The ratings could be confirmed if it appeared likely that Global Liman and the wider GPH group were able to mitigate the deterioration in the group's cash flows such that the company's financial profile remains comfortably positioned against the guidance for the current ratings.

The ratings could be downgraded if (1) it appeared likely that Global Liman's credit metrics would not improve to the levels commensurate with the current rating, which includes Funds from Operations (FFO)/debt of at least 10% and FFO interest cover above 2.0x, (2) there was a further deterioration in the company's operating performance as reflected in, for example, declining volumes; or (3) if it was apparent that the company's ability to refinance debt may be significantly challenged. Furthermore, the senior unsecured notes rating could be downgraded, if it appeared likely that the position of the noteholders would become weaker in the context of the company's operating performance and expected evolution of the capital structure.

..Issuer: Global Liman Isletmeleri A.S.

On Review for Downgrade:

.... Probability of Default Rating, Placed on Review for Downgrade, currently B2-PD

.... Corporate Family Rating, Placed on Review for Downgrade, currently B2

....BACKED Senior Unsecured Regular Bond/Debenture, Placed on Review for Downgrade, currently B2

Outlook Actions:

..Issuer: Global Liman Isletmeleri A.S.

....Outlook, Changed To Rating Under Review From Stable

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Privately Managed Port Companies published in September 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Global Liman Isletmeleri A.S. is a port operator domiciled in Turkey. The company operates the mixed commercial and cruise port of Akdeniz located on Turkey's Mediterranean coast and two cruise and ferry ports (Bodrum and Ege) located on Turkey's Aegean coast. In addition, Global Liman holds a controlling stake in the commercial port of Bar (Montenegro, 64%), and a number of cruise ports internationally. Global Liman is 100% owned by Global Ports Holding PLC, which is listed on the London Stock Exchange.

REGULATORY DISCLOSURES

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Joanna Fic
Senior Vice President
Infrastructure Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Andrew Blease
Associate Managing Director
Infrastructure Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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