Fitch affirms Positive Outlook for Turkey’s Dogus Holding

Published January 28th, 2004 - 02:00 GMT

Fitch Ratings has affirmed the B Senior Unsecured foreign currency rating and B Senior Unsecured local currency rating of Turkey’s Dogus Holding.  


The Outlook for Dogus's International Senior Unsecured foreign currency and local currency ratings are Positive, as are those for the Turkish Sovereign rating and the company's subsidiary, Turkiye Garanti Bankasi.  


The ratings assigned reflect Dogus's strong presence in the Turkish financial sector, and hence a dependence on the operating performance of its financial interests, and its significant assets, which act as a tool for de-leveraging and business diversification.  


As a holding company, Dogus relies on dividend upflows, service income and capital gains. It currently has majority control of all its subsidiaries and Fitch believes that management has the scope to direct cash upflows when needed, such as funding or debt amortization and to provide support for its operating companies in the form of intra-group loans, capital injections and asset swaps.  


Net debt at the holding company level continued to increase in the first half of 2003, reaching $712 million, while falling across the group's other non-financial businesses. Dogus's subsidiaries reported stronger performances in 2003 than 2002, but capital gains and dividend upflows into the holding company, which could reduce Dogus's debt, were still limited.  


It is likely that Dogus will only receive €25 million in dividends from its auto interests in 2004 as the other operating companies are expected to retain earnings. The improved performances of Garanti and Tansas may herald the distribution of dividends in 2006 from 2005 profits.  


Therefore, a prospective Dogus Otomotiv Holding initial public offering (IPO) in 2004 or other possible equity offerings in 2005 and 2006 would be essential to Dogus de-leveraging in the short to medium term. In the event new partnerships are formed, which may provide fresh cash inflows, the capital structure may alter at an earlier date.  


The current ratings are at the same level as Garanti's although in future this may not remain the case and could be a subject for structural sub-ordination, depending on dividend upflows, business diversification, debt at the holding company level and cash generation within the non-financial operating businesses. Ultimately, Garanti is expected to remain the Group's flagship and to become the main cash generator. To this end, transferring cash up to the holding company in the form of dividends will be crucial for holding's long-term creditworthiness.  


Founded in 1975 and wholly owned by the Sahenk family, Dogus Holding is a member of the Dogus Group, a diversified Turkish conglomerate with interests in a variety of financial services, automotive, food retail, construction, tourism and media. — ( 


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