July 22, 2016 / 9:07 PM / in 3 years

Fitch Applies Criteria Changes to Turkey's Ratings

(The following statement was released by the rating agency) LONDON, July 22 (Fitch) Fitch Ratings has downgraded Turkey's Long-term Local Currency IDR to 'BBB-' from 'BBB'. The Outlook is Stable. The issue ratings on Turkey's long-term senior unsecured local currency bonds have also been downgraded to 'BBB-' from 'BBB'. The Short-Term Foreign Currency IDR has been affirmed at 'F3'. A new Short-Term Local Currency IDR of 'F3' has been assigned. The issue ratings on Turkey's Hazine Mustesarligi Varlik Kiralama Anonim Sirketi's (Hazine) long term local currency global certificates (sukuk) have also been downgraded to 'BBB-' from 'BBB'. Under EU credit rating agency (CRA) regulation, the publication of sovereign reviews is subject to restrictions and must take place according to a published schedule, except where it is necessary for CRAs to deviate from this in order to comply with their legal obligations. Fitch interprets this provision as allowing us to publish a rating review in situations where there is a material change in the creditworthiness of the issuer that we believe makes it inappropriate for us to wait until the next scheduled review date to update the rating or Outlook/Watch status. The next scheduled review date for Fitch's sovereign rating on Turkey is 19 August 2016, but Fitch believes that changes to our criteria warrant such a deviation from the calendar and our rationale for this is laid out below. The rating committee that assigned the ratings included within this Rating Action Commentary was a portfolio review following recent changes to our criteria, and focused on three areas, namely the assignment of Short-Term Local Currency IDRs, the review of existing Short-Term Foreign Currency IDRs and the review of the notching relationship between existing Long-Term Local Currency IDRs and Long-Term Foreign Currency IDRs. The committee approved a variation from criteria on the basis that the review applied all relevant sections of our criteria related to the above rating types but did not apply the sections of the criteria related to Long-Term Foreign Currency IDRs, as the latter were not included in the scope of this review. KEY RATING DRIVERS The downgrade of Turkey's LTLC IDR to 'BBB-' from 'BBB' reflects the following key rating driver and its relative weight:- High -In line with the updated guidance contained in Fitch's revised Sovereign Rating Criteria dated 18 July 2016, the credit profile of Turkey does not support a notching up of the LTLC IDR above the LTFC IDR. This reflects Fitch's view that neither of the two key factors cited in the criteria that support upward notching of the LTLC IDR are present for Turkey. Those two key factors are: (i) strong public finance fundamentals relative to external finance fundamentals, and (ii) previous preferential treatment of LC creditors relative to FC creditors. The affirmation of Turkey's STFC IDR at 'F3' reflects the following key rating driver:- -In line with the updated guidance contained in Fitch's revised Sovereign Rating Criteria dated 18 July 2016, Turkey's STFC IDR is derived from the mapping to the sovereign's LTFC IDR of 'BBB-'. The assignment of a STLC IDR of 'F3' to Turkey reflects the following key rating driver and its weight: HIGH - The assignment of the STLC IDR is consistent with Fitch's approach to assigning ST ratings by using its Long-Term/Short-Term Rating Correspondence table to map the STLC IDR from the LTLC rating scale. According to Fitch's Rating Definitions, the Fitch Rating Correspondence Table is "a guide only and variations from this correspondence will occur". However, Fitch variations to this approach are rare in the case of sovereign ratings. Turkey's STLC is derived from the mapping to the sovereign's revised LTLC IDR of 'BBB-'. RATING SENSITIVITIES The main factors that could lead to a change in the LTLC IDR are as follows: - A change in the LTFC IDR - A change in the key factors or supporting factors for notching up of the LTLC IDR from the LTFC IDR The main factors that could lead to a change in the STFC IDR or the STLC IDR are as follows: - A change in the LTFC IDR (for the STFC IDR) - A change in the LTLC IDR (for the STLC IDR) The rating sensitivities outlined in the previous Rating Action Commentary dated 26 February 2016 are unchanged in respect of the LTFC IDR. Consistent with the criteria variation referred to above, a review of the LTFC IDR and associated rating sensitivities was not included as part of this review. ASSUMPTIONS The assumptions outlined in the previous Rating Action Commentary dated 26 February 2016 are unchanged in respect of the LTFC IDR. Consistent with the criteria variation referred to above, a review of the LTFC IDR and associated assumptions was not included as part of this review. Contact: Primary Analyst Paul Gamble Senior Director +44 203 520 1623 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Toby Iles Director +852 2263 9832 Committee Chairperson Tony Stringer Managing Director +44 20 3530 1219 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available on www.fitchratings.com Turkey - Rating Action Report here Applicable Criteria Rating Sukuk (pub. 18 Aug 2015) here Sovereign Rating Criteria (pub. 18 Jul 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1009365 Solicitation Status here Endorsement Policy here ail=31 ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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