Fitch raises Aegean İzmir Municipality’s currency grade

ISTANBUL- Hürriyet Daily News

Fitch Ratings has upgraded the Metropolitan Municipality of İzmir’s long-term foreign currency rating and long-term local currency rating to “BBB-“ from “BB+.” The agency also upgraded İzmir’s national long-term rating to ‘AA+(tur)’ from “AA(tur)” in a statement. The outlooks on the long-term ratings are stable.

“The upgrade reflects decreasing debt, strong budgetary performance, robust local economy and improved self-financing capacity on capex. It also reflects high capex needs, foreign currency-denominated debt and loss-making municipal companies and public entities,” Fitch Ratings said.

The stable outlook reflects İzmir’s strong economy, which should lead to continued dynamic tax growth and increasing revenue. “Despite a projected moderate increase in debt levels, İzmir’s forecast operating performance should enable the municipality to maintain strong fiscal performance and sound debt coverage ratios,” the rating agency noted.

İzmir has a strong budgetary performance with operating margin over 60 percent in 2012 leading to strong debt coverage ratios, according to Fitch Ratings, which forecasted that strong operating margins would continue to result in safe debt servicing capacity in 2013-2015.

Turkish metropolitan administrations have high capital expenditure responsibilities, primarily in transport infrastructure. Izmir’s five-year average capex accounted for over 45 percent of total expenditure. “However, İzmir’s self-financing capacity on capex is above its national and international peers. Current balance could cover 112 percent of capex in 2012 and the figure has not fallen below 75 percent,” the ratings agency said.