(Repeat for additional subscribers)
April 17 (The following statement was released by the rating agency)
Fitch Ratings says in a new report that the debt servicing capacities of the Metropolitan Municipalities of Istanbul (BBB-/Stable) and Izmir (BBB-/Stable) have been affected by a weaker Turkish lira (TRL) but the impact is not significant enough to result in a rating change.
Fitch assessed the municipalities under different scenarios featuring the depreciation of the TRL, given their large proportion of unhedged foreign currency borrowing, and, in the case of Izmir, also the recent interest rate increase, in view of the share of its variable interest rate debt.
Fitch considers that based on 2012 financial data the financial ratios of Istanbul and Izmir under different scenarios show that they remain consistent with the medians for the 'BBB' rating category after the TRL depreciation in 2013.
TRL depreciated about 20% against USD and 26% against EUR in 2013, as a result of the sharp reversal of the capital flows into emerging market economies and increased political uncertainty. Turkey was especially vulnerable with its significant external imbalances (current account deficit accounted for almost 8% of GDP in 2013).
The special report, entitled 'FX Volatility at Current Levels Manageable for Turkish Subnationals ', is available on www.fitchratings.com.
Link to Fitch Ratings' Report: Turkish Subnationals: FX Volatility Manageable at Current Levels