Fitch Rates Derindere Turizm Otomotiv Sanayi ve Ticaret 'BBB(tur)'; Outlook Stable

Fri Jul 4, 2014 11:26am EDT

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(The following statement was released by the rating agency) LONDON, July 04 (Fitch) Fitch Ratings has assigned Derindere Turizm Otomotiv Sanayi ve Ticaret A.S. (DRD) a National Long-term rating of 'BBB(tur)' with a Stable Outlook. KEY RATING DRIVERS DRD's National Rating reflects its leading franchise as the largest domestically owned fleet management company in Turkey, albeit only a fraction of the overall financial sector. Demand for fleet management solutions in Turkey is increasing and Fitch believes DRD is well placed to take advantage of the expected growth. The company's franchise is expanding fast (the fleet size grew 13% in 2013) and its corporate customer and fleet diversification is increasing as a result. In Fitch's opinion, DRD's customer service network across Turkey, for maintenance and repair for leased vehicles, is wide and provides the company with an advantage in serving its customers' needs. DRD's asset quality is sound. Customer concentration has been gradually decreasing and, in Fitch's opinion, its high exposure to lower-risk large corporate customers supports its lease underwriting and credit quality. DRD is highly leveraged and reliant on wholesale funding. Short-term borrowings constituted 47% of total debt. While Fitch acknowledges that short-term borrowing is common in Turkey it nevertheless elevates DRD's rollover risk. DRD has substantial committed bank credit lines, which help to reduce this risk. DRD's profile is marked by volatile earnings, largely due to foreign exchange risk. Funding is largely denominated in foreign currency, as are lease receivables (recorded off-balance sheet). Assets are mainly denominated in the Turkish lira. DRD's net open foreign exchange position was a high 116% of shareholders' equity at end-2013. Whilst the company uses hedge accounting to partially mitigate foreign exchange risk, in Fitch's view, its earnings remain sensitive to significant movements in the value of the Turkish lira against other major currencies. This was the case, for example, in in 2013 and early 2014. RATING SENSITIVITIES DRD's ratings are sensitive to significant fluctuations in exchange rates, which could weaken its performance, and deterioration in its capital and leverage ratios. DRD's National Rating could be upgraded if leverage declines and rollover risk is reduced. Contact: Primary Analyst Banu Cartmell Director +44 20 3530 1109 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Tarik Dueyme Associate Director +49 69 7680 76 129 Committee Chairperson Erwin van Lumich Managing Director +34 93 323 8403 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available on www.fitchratings.com Applicable criteria, Global Financial Institutions Rating Criteria, dated 12 January 2014, are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Additional Disclosure Solicitation Status here 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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