Moody's downgrades Turkey's long-term issue ratings
ISTANBUL, August 18, 2018
Moody's Investors Service has downgraded the Government of Turkey's long-term issuer ratings to Ba3 from Ba2 and changed its rating outlook to negative, concluding the review for downgrade that was initiated on June 1, 2018.
The senior unsecured bond ratings and senior unsecured shelf ratings have also been downgraded to Ba3 and (P)Ba3 respectively, said the statement from Moodys.
Concurrently, Moody's has downgraded to Ba3 from Ba2 the senior unsecured bond rating of Hazine Mustesarligi Varlik Kiralama AS, a special purpose vehicle wholly owned by Turkey from which the Turkish Treasury issues sukuk lease certificates, and changed its rating outlook to negative.
The key driver for today's downgrade is the continuing weakening of Turkey's public institutions and the related reduction in the predictability of Turkish policy making.
That weakening is exemplified by heightened concerns over the independence of the central bank, and by the lack of a clear and credible plan to address the underlying causes of the recent financial distress, notwithstanding recent statements by the government.
The tighter financial conditions and weaker exchange rate, associated with high and rising external financing risks, are likely to fuel inflation further and undermine growth, and the risk of a balance of payments crisis continues to rise.
In a related decision, Moody's lowered Turkey's long-term country ceilings: the foreign currency bond ceiling to Ba2 from Baa3; its foreign currency deposit ceiling to B1 from Ba3; and its local currency bond and deposit ceilings to Ba1 from Baa2.
The short-term foreign currency bond ceiling was also lowered to Not Prime (NP) from Prime-3 (P-3) and the short-term foreign currency deposit ceiling remains unchanged at Not Prime (NP).
Ceilings generally act as the maximum ratings that can be assigned to a domestic issuer in Turkey, including structured finance securities backed by Turkish receivables. The decision to narrow the gap between the ceilings and the government bond rating is informed by Moody's view of weakening institutional strength.-TradeArabia News Service
