Top Turkish firms put under review by Moody's

Eleven of Turkey’s top companies were put under review by credit ratings agency Moody’s, which said their credit quality was correlated in varying degrees to the government in Ankara.

The firms, which included Koç Holding, Turkey’s biggest industrial conglomerate, Doğuş Holding, which has applied to banks to restructure some of its debt, and Turkish Airlines, have high dependence on their Turkish operations for revenue and cash flow, Moody’s said in a statement on Thursday.

Moody’s said it “will assess the credit implications and potential vulnerabilities on each of the company’s ratings in the context of a currently challenging operating environment.

“In particular, Moody’s will assess the impact of the macro-economic environment on the various companies’ liquidity profiles and ability to refinance approaching debt maturities, valuations and the weakening lira on costs structures and foreign currency debt obligations.”

All but one of the companies -- Doğuş Holding – have stable outlooks for their ratings, according to Moody’s.

Turkey's government has accused Moody's and other ratings agencies of mounting a campaign against the economy in an effort to unseat President Recep Tayyip Erdogan and his party at elections on June 24.

Moody’s is also reviewing Turkey’s sovereign credit rating amid uncertainty over the future direction of macroeconomic policy. There is a risk of “severe pressures on Turkey’s balance of payments” to a degree that is inconsistent with Turkey’s current rating, it said earlier this month.

The ratings agency made the statement prior to a decision by the country’s central bank on Thursday to raise interest rates by 125 basis points to 17.75 percent. The increase follows a 300 basis-point hike in May. Investors had called for the rate hikes to arrest a slide in the lira and to address macro-economic imbalances, which include inflation of 12.2 percent and a current account deficit of about 6 percent of GDP.

The lira strengthened as much as 2 percent on Thursday, potentially easing the foreign debt buden of Turkish companies, to trade at 4.46 per dollar. The currency slumped to a record low of 4.92 per dollar last month.

Turkish firms have about $226 billion of outstanding foreign loans that must be serviced or repaid, according to central bank data. The figure amounts to about 30 percent of the country's GDP.

Moody’s cut Turkey’s sovereign rating to “Ba2” from “Ba1” on March 8 and changed its outlook to “stable” from “negative.”