Fitch Ratings has affirmed the B senior unsecured foreign currency rating of Turkish newspaper Hurriyet Gazetecilik ve Matbaacilik AS and its B+ senior unsecured local currency rating. The rating outlook is stable.
The rating action follows the completion of Fitch's annual review process. Hurriyet is Turkey's leading daily national newspaper, with leading positions in terms of advertising and circulation revenues. It is a majority owned subsidiary of Dogan Media Group (DMG) which in turn is controlled by Dogan Holding (DH), and ultimately the Dogan family.
DMG is the leading media-entertainment conglomerate in Turkey, with operations in newspaper, magazine and book publishing, TV and radio broadcasting, newspaper and magazine distribution, printing, and new media. While Hurriyet continues to stand as the prime cash generator of DMG its EBITDA contribution to the group is estimated to fall below 65 percent in 2002.
The rating affirmation reflects Hurriyet's strong business position thanks to its powerful brand name and its market position in the Turkish newspaper industry, which was poised to capitalize on a rebound in the Turkish economy in 2002.
Signs of general economic recovery during 2002 are reflected in the 33 percent growth in the advertising market where Hurriyet's market share has remained stable at around 42 percent. The volatility of advertising revenue is also reflected in the rating.
Fitch recognizes the improving credit profile of the company throughout 2002. This improvement has been driven by a number of factors including improving macroeconomic conditions in Turkey, management's focus on cash flow generation in the aftermath of the 2001 crisis, a decline in global newsprint prices and relatively limited competition in the Turkish newspaper industry. Consequently, margins were impressive in 2002 with an expected FY2002 EBITDA margin of over 30 percent.
While competition appears to be increasing in the Turkish newspaper industry due to new launches, Fitch believes this should have only a limited near to medium-term impact on Hurriyet's operational position due to its established market position and brand strength.
Hurriyet has pursued a conservative financial policy, as demonstrated by moderate leverage levels and a reduction in capital expenditure following a modernization program that has strengthened its cash flow. Fitch expects the adjusted leverage measures, after contingent liabilities, in FY2002 will still be in line with the current ratings.
Following changes in Turkish media ownership rules DMG has consolidated its television interests and taken on debt to fund these investments. Fitch's rating takes account of the financial guarantees provided by Hurriyet in support of about 25 percent of the DMG debt. Furthermore, the agency takes comfort from its understanding that some of Hurriyet's debt includes leverage covenants that are adjusted for contingencies. These contingencies include the provision of financial guarantees. — (menareport.com)
© 2003 Mena Report (www.menareport.com)
