TURKEY: Broad credit implications of failed military coup

Turkey’s failed military coup has credit implications for many of the country’s debt issuers and highlights the pre-existing challenges that could dent economic growth, impede structural reforms and expose further external vulnerabilities, Moody’s Investors Service said in a report that assesses the ratings impact of recent events.

 
The cross-sector report summarises the rating actions already taken in Turkey by Moody’s since the failed coup on July 15-16. It does not announce any new rating actions.
Since the coup attempt, Moody’s has:
– Placed Turkey’s Baa3 sovereign bond ratings on review for downgrade, reflecting the need to assess the impact of the failed coup on pre-existing credit challenges.
– Placed three sub-sovereign issuer ratings under review for downgrade: the metropolitan municipalities of Istanbul and Izmir, as well as Turkey’s Housing Development Administration. This reflects the issuers’ strong institutional, operational and financial linkages with the sovereign and their increased debt servicing costs stemming from the weaker Turkish lira.
– Placed the ratings of 17 Turkish banks on review for downgrade, a decision driven by a potential weakening of the government’s capacity and willingness to provide extraordinary support to the banks, as well as the potentially weaker operating environment following the coup.
– Placed eight companies, one insurer and one port on review for downgrade to reflect concerns over Turkey’s domestic operating environment.
In total, Moody’s has placed 41 Turkish issuers on review for downgrade. Moody’s has also downgraded the rating of one non-financial corporate with a negative outlook. Details of the rationale behind the changes and a table summarising all the actions are contained in the report and in previously published announcements.