Fitch Revises Metropolitan Municipality of Antalya's Outlook to Negative on Sovereign Rating Action
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 Antalya is 02 December 2016.
KEY RATING DRIVERS
The revision of the Outlook reflects the following key rating drivers and their relative weights:
Following the revision of the Outlooks on Turkey's Long-Term Foreign and Local Currency IDRs on 19 August 2016,, the Outlook on Antalya's Long-Term Local Currency IDR is 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 Outlook on Antalya's Long-Term Local Currency IDR 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.
We previously assigned Antalya's IDRs on 23 June 2016. The city's Long Term Foreign Currency IDR is unaffected by today's rating action.
Antalya's Long-Term Local Currency IDR and the Outlook on it, is aligned with that of the sovereign and therefore is sensitive to any negative rating action on the sovereign's IDR or Outlook. A sharp increase in local and external debt and a deterioration of the deficit before debt variation to more than 15% of total revenues could also prompt a downgrade, although this is not Fitch's base case scenario.
Sustainable reduction of the net overall risk, with debt to current revenue below 50% and FX share of debt below 50% and continuation of strong budgetary performance with operating expenditure not higher than budgeted would be positive for the Long-Term IDRs and National Rating.
The rating actions are as follows:
Long-Term Local Currency IDR: affirmed at 'BBB-'; Outlook revised to Negative from Stable
Long-Term Foreign Currency IDR: unaffected at 'BB+'; Outlook Stable
Short-Term Local Currency IDR: unaffected at 'F3'
National Long-Term rating: unaffected at 'AA+ (tur)' Outlook Stable
Short-Term Foreign Currency IDR: unaffected at 'B'