October 14 (SeeNews) - Moody's Investors Service said it has assigned a long-term Baa3 rating to the U.S. dollar lease certificate issued by the government of Turkey's asset leasing company Hazine Mustesarligi Varlik Kiralama Anonim Sirketi.
The outlook on the rating is stable, the ratings agency said in a statement on Saturday.
Moody's said also in the statement:
"RATINGS RATIONALE
Moody's definitive rating for these debt obligations confirms the provisional rating assigned on 3 October 2013.
In Moody's opinion, the payment obligations represented by the lease certificates to be issued by Hazine MЭstesarligi Varlik Kiralama Anonim Sirketi are ranked pari passu with other senior, unsecured debt issuances of the Government of Turkey. As such, Moody's Baa3 rating for the proposed lease certificate issuance is in line with the Government of Turkey's Baa3 issuer rating and stable outlook given that any direct government obligation whose repayment is handled by the Government of Turkey receives a rating equivalent to that of the government.
Turkey's Baa3 government bond rating is primarily underpinned by (1) the diversification and dynamism of its economy -- now the world's 17th largest; and (2) the government's robust balance sheet and track record of prudent fiscal policy. Recent policy reforms designed to structurally reduce external vulnerabilities have helped the country build up its shock-absorption capacity and were key drivers of our decision to upgrade Turkey's sovereign rating to Baa3 in May 2013.
The muted impact that the short-lived recession in 2009 (and the associated reversal in capital flows) had on the Turkish government's balance sheet was a key indicator of the sovereign's strengthened shock-absorption capacity. Since then, the government's balance sheet has continued to strengthen, with debt-to-GDP falling by 10 percentage points since 2009 and the composition of government debt becoming more resilient through lengthened maturities and a reduced share of foreign-currency-denominated liabilities.
Nevertheless, Turkey's rating is constrained by the high level of external vulnerabilities present in the economy, with a current account deficit and an external vulnerability indicator (which measures short-term foreign debt obligations in the economy as a proportion of foreign-exchange reserves) among the highest in the investment-grade sovereign rating universe. Moreover, despite having narrowed recently, we expect Turkey's current account deficits and the associated external financing needs (projected at around 25% of GDP in 2013) to remain elevated over the medium term. Turkey is also susceptible to geopolitical risks, specifically those stemming from Syria's ongoing civil war. It also remains vulnerable to a resumption in hostilities with the Kurdistan Workers' Party (PKK), a violent separatist group which has been a long-standing source of political uncertainty, although Moody's acknowledges the positive developments in the peace process in 2013.
Looking ahead, the major challenge for the Turkish authorities will be to continue reducing external vulnerabilities while ensuring healthy and sustained economic growth. The authorities are attempting to address these areas via a wide range of structural reforms that are aimed at tackling the low domestic saving rate, the country's substantial energy needs as well as the high import content of exports. We expect the reform momentum to be maintained over the medium term and to help erode external vulnerabilities. However, given the magnitude of these imbalances, we do not anticipate the associated risks to be reduced materially in the short term.
GDP per capita (PPP basis, US$): 14,812 (2012 Actual) (also known as Per Capita Income)
Real GDP growth (% change): 2.2% (2012 Actual) (also known as GDP Growth)
Inflation Rate (CPI, % change Dec/Dec): 6.2% (2012 Actual)
Gen. Gov. Financial Balance/GDP: -1.7% (2012 Actual) (also known as Fiscal Balance)
Current Account Balance/GDP: -5.9% (2012 Actual) (also known as External
Balance)
External debt/GDP: 42.8% (2012 Actual)
Level of economic development: High level of economic resilience
Default history: At least one default event (on bonds and/or loans) has been recorded since 1983.
On 9 October 2013, a rating committee was called to discuss the rating of the HAZINE MUSTESARLIGI VARLIK KIRALAMA ANONIM SIRKETI. The main points raised during the discussion were: The committee discussed whether this issuance was pari passu with other senior unsecured issuance from the Government of Turkey."