Fitch downgraded the debt ratings of leading Turkish home appliance maker Arçelik citing loan refinancing risks and concerns over its cash balance.
Fitch cut Arçelik’s Long-Term issuer Default Rating and senior unsecured ratings to ‘BB’ from ‘BB+, according to a statement published on Thursday.
The company cited Arçelik’s loan repayments in 2020 and 2021 of an average 5 billion liras ($725 million) per year. It also highlighted a cash balance of 7.8 billion liras, which it said barely covered 6.1 billion liras of short-term debt coming due over the next 12 months and negative free cash flow of 1.3 billion liras this year.
Turkish companies are finding their debts more expensive to repay after the lira fell to a record low against the dollar following the outbreak of the coronavirus in March. The short-term foreign debts of the firms totalled $122.5 billion at the end of February, according to central bank data.
“Fitch is forecasting that Arçelik will be able to successfully refinance both its short-term debt and Eurobond, during the respective year of repayment, albeit at higher interest rates, given the current challenging liquidity environment,” the ratings agency said. “Fitch expects Arçelik to successfully complete refinancing before 2Q21. However, failure to do so could put pressure on the ratings.”
Arçelik is Turkey’s largest manufacturer of refrigerators, washing machines and other home appliances. Its subsidiaries include Beko, which sells the products abroad. It is owned by Koç Holding, the country’s largest industrial group.
Ahval