Lira slide adds pressure to Turkish firms: Fitch

ISTANBUL

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Fitch Ratings issued a second statement about Turkey in three days, saying a further prolonged decline in the currency would put pressure on Turkish companies’ ratings.

“Turkish corporates are historically and structurally vulnerable to FX volatility, in part due to currency mismatches between debt, cash flow and under-hedged positions on foreign-currency debt,” the statement release by the agency said on Jan. 9.

The Turkish Lira has been under intense pressure since the U.S. Federal Reserve announced it will begin winding down, or tapering, its $85 billion-a-month money-printing program and Turkey’s high-level corruption probe has added to that pressure.

The lira dropped approximately 15 percent against the dollar and 20 percent against the euro over 2013, the agency calculated.

Despite the lira’s fall, it will have a limited impact on credit metrics, when it will be combined with the potential for other domestic shocks from the country’s political crisis, it constitutes risks to ratings in the coming year.

“As most rated Turkish corporates are raw material importers, especially of energy and intermediate goods, margin pressure from rising costs is likely to be seen across the market. The impact of a prolonged decline will be worse for companies with little or no foreign currency revenues to offset rising costs,” the ratings agency noted.