OREANDA-NEWS. Fitch Ratings has revised the Outlooks on the Metropolitan Municipality of Izmir's Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) to Negative from Stable and affirmed the IDRs at 'BBB-'.

Under EU credit rating agency (CRA) regulation, the publication of International Public Finance reviews is subject to restrictions and must take place according to a published schedule, except where it is necessary for CRAs to deviate from this in order to comply with their legal obligations. In this case the deviation was caused by the revision of the Outlooks of Turkey's IDRs to Negative from Stable on 19 August 2016 (see 'Fitch Affirms Turkey at 'BBB-'; Revises Outlook to Negative' at www. fitchratings. com). The next scheduled review date for Izmir is 02 December 2016.


The revision of the Outlooks reflects the following key rating drivers and their relative weights:


Institutional Framework

Following the revision of the Outlooks on Turkey's Long-Term Foreign and Local Currency IDRs on 19 August 2016, the Outlooks on Izmir's Long-Term Foreign and Local Currency IDRs are now equalised with that on the sovereign. Since local and regional governments usually cannot be rated above the sovereign according to Fitch's International Local and Regional Governments Criteria, the Outlooks on Izmir's IDRs needed to be revised in line with that on Turkey.

The centralised nature of Turkish local governments (municipalities in general) is reflected in the close financial linkage between the central government and the municipalities, exposing them to the country's macro-economic performance and policy and socio-economic conditions.. As Izmir's Long-Term IDRs are aligned with those of the sovereign, its IDRs and Outlooks are sensitive to any negative rating action or Outlook revision on the sovereign's IDRs

We previously affirmed Izmir's IDRs on 3 June 2016.


Any rating action on Turkey (BBB-/Negative/F3) would be mirrored by Izmir's IDRs. A sharp increase in its direct debt to current revenue above 60%, driven by capex and local currency devaluation could also lead to a downgrade.

The rating actions are as follows:

Long-Term Foreign and Local Currency IDRs: affirmed at 'BBB-'; Outlooks revised to Negative from Stable

National Long-Term rating: unaffected at 'AA+(tur)'