Fitch cut the long-term credit default rating of OYAK, the Turkish military’s pension fund, to ‘BB-‘ from ‘B’, citing its exposure to the country’s volatile economy.
The downgrade reflects the view that the company does not have sufficient structural enhancements to allow its credit rating to remain above Turkey’s country rating of ‘BB-‘, Fitch said in a statement on Wednesday.
“OYAK has high exposure to a single volatile market, Turkey, and high dependency on the dividends of a single asset, (iron and steelmaker) Erdemir,” Fitch said. “This exposes it to fluctuations in the dividend flow.”
Fitch said OYAK’s credit profile remained strong, with lower loan to value ratios in line with companies with a strong investment grade. That strength exists despite the COVID-19 pandemic and recent investments in the energy business, it said.
The company also has strong liquidity, thanks to its significant cash holdings and financial investments that could easily be used to meet pension payments, Fitch said.