www.moodys.com -London, 05 September 2012 -- 5 September 2012 -- Moody's Investors Service has
assigned a provisional foreign currency rating of (P)Ba1 to Turkey's
proposed US dollar-denominated sovereign sukuk. The outlook
is positive.
RATINGS RATIONALE
In Moody's opinion, the obligations that would be incurred
by the sukuk rank pari passu with other senior, unsecured debt issuances
of the Republic of Turkey and therefore carry the same rating.
Moody's expects to remove the provisional status of the rating upon
the closing of the proposed issuance and a review of its final terms. (source)
Turkey's government bond rating is Ba1, further to Moody's
upgrade on 20 June 2012. The key drivers for the rating action
were (1) the significant improvement in Turkey's public finances
and the resulting increased shock-absorption capacity of the government's
balance sheet; and (2) policy actions that have the potential to
address external imbalances, such as Turkey's large current
account deficit, which is the largest credit risk facing the country.
In Moody's rating methodology, Turkey's economic strength
is "moderate to high" in the sovereign rating spectrum.
The large scale of the economy and its diversification, plus its
underlying dynamism, has pushed per capita incomes to levels well
above those of peers. Turkey's increased integration into
the global economy is likely to maintain such growth in the coming years.
Key supports to the government's ratings include its effectiveness,
transparency and rule of law. The latter speaks in part to a high
willingness to repay its debt, as demonstrated during the severe
2001 financial crisis.
The government's financial strength has been improving steadily
over the past decade, and this improvement can be seen across a
wide range of financial metrics, such as debt/revenue and debt affordability.
In its rating methodology, Moody's now assesses the government's
financial strength as "high". Although the international
economic environment has become more challenging and Turkish domestic
growth is slowing down, the country's ongoing efforts to reduce
its debt burden are unlikely to be significantly affected. The
relatively minor and short-lived deterioration in Turkey's
public finances following the 2008-09 financial crisis gives further
cause for optimism.
Moreover, Moody's notes that the deficit reduction and primary
surpluses that the Turkish government has recorded over the past two years
are largely due to expenditure restraint rather than revenue increases,
despite Turkey's booming economic growth in the past two years.
In fact, since 2009, Turkey's general government expenditure
as a percentage of GDP has fallen to 37.4% from 40.1%,
whereas general government revenues have risen to 36.1%
from 34.2% %. Even in Moody's adverse
scenario, which includes more pessimistic outcomes (relative to
the rating agency's forecasts) for nominal GDP growth, the
primary balance and interest costs, the rating agency would expect
a slight reduction in Turkey's debt burden over a two-year
time horizon. In fact, Turkey's general government
debt level in 2011 was much lower than the Ba1 median of 56.4%
and more in line with the Baa3 median of 38.5%.
Turkey's resilience to economic, financial and political vulnerabilities
has strengthened considerably in recent years, as evidenced by the
ability of the country's financial markets to endure volatile capital
inflows and ongoing infighting between the society's secular and
religious elements. Nonetheless, there are some noteworthy
areas of political risk in Turkey, some of which stem from secular-religious
tensions, others from longstanding regional and ethnic conflicts.
Due to the size of Turkey's external imbalances, Moody's
considers the country's susceptibility to event risk to be high.
However, in the first half of 2012, the government adopted
policies, such as an improved investment incentive scheme and increased
incentives for individuals to pay into individual pensions, that
have the potential to address some of the root causes of Turkey's
external imbalances.
The positive outlook on the Turkish government's ratings reflects
Moody's expectation that both the country's public finances
and resilience to external shocks will continue to improve its fiscal
and macroeconomic resilience.
The principal methodology used in this rating was Sovereign Bond Ratings
published in September 2008. Please see the Credit Policy page
on www.moodys.com for a copy of this methodology.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following :
parties involved in the ratings, parties not involved in the ratings,
and public information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
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uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
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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.
Sarah Carlson
VP - Senior Credit Officer
Sovereign Risk Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Bart Oosterveld
MD - Sovereign Risk
Sovereign Risk Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service Ltd.
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Source: http://www.moodys.com/research/Moodys-assigns-PBa1-rating-to-Turkeys-upcoming-sovereign-sukuk-positive--PR_254556 - Sept 5, 2012
