Fitch downgrades Turkey’s sovereign debt by one notch

A money changer counts Turkish lira banknotes at a currency exchange office in Istanbul, Turkey, in this file photo taken on August 2, 2018. (REUTERS)
Updated 15 July 2019

Fitch downgrades Turkey’s sovereign debt by one notch

  • The country also continues to run the risk of US economic sanctions triggered by delivery of Russian missile components

WASHINGTON: Ratings agency Fitch on Friday downgraded Turkey’s sovereign debt by one notch to ‘BB-‘ with a negative outlook, after President Recep Tayyip Erdogan sacked the governor of the central bank.
The firing of Murat Cetinkaya last weekend for failing to follow government instructions “risks damaging already weak domestic confidence,” Fitch said in a statement. It also could jeopardize foreign investment, which the country needs and create “worsening economic outcomes.”
Erdogan has repeatedly railed against high interest rates and called for them to be lowered to stimulate growth.
He once called high rates the “mother and father of all evil.”
Turkey’s main interest rate is 24 percent after the bank under Cetinkaya made an aggressive rate hike of 625 basis points in September 2018, in reaction to a currency crisis in August.
Last month, Erdogan said the rate was “unacceptable,” promising to find a solution as soon as possible. But Fitch said the firing demonstrates Erdogan will not tolerate the need for a period of lower growth to choke off inflation which has averaged 10.3 percent over the past five years.
“The president has regularly expressed unorthodox views on the relationship between interest rates and inflation, and has indicated the governor was replaced because he did not follow government instruction on interest rates,” Fitch said.
It also “highlights a deterioration in institutional independence and economic policy coherence and credibility.”
The country also continues to run the risk of US economic sanctions triggered by delivery of Russian missile components, the agency said, which could provide another hit to confidence in the economy.


Struggling WeWork mulls bailout deals with SoftBank, JP Morgan

Updated 52 min 3 sec ago

Struggling WeWork mulls bailout deals with SoftBank, JP Morgan

TOKYO: Under-pressure start-up WeWork is considering two huge bailout plans including a cash injection that could see Japanese investment titan SoftBank take control of the firm, according to reports.
The office-sharing giant had been on course for a massive initial public offering until last month when questions began to be asked over its governance and profit outlook.
The firm’s valuation plunged from $47 billion in January to less than $20 billion in September and the listing plans have been dropped, while co-founder Adam Neumann stepped down as chief executive.
With New York-based parent company We Co. not expected to push for the IPO this year, the cash-strapped firm is looking for a financial lifeline.
The Wall Street Journal, New York Times and Bloomberg News cited unnamed sources close to the talks as saying SoftBank — the US firm’s biggest shareholder — had drawn up a proposal that gives it full control of WeWork.
The move would dilute the voting power of Neumann, who remains as chairman of the company he started in 2010 and also currently maintains control a majority of voting shares.
They also reported that WeWork is looking at a deal with Wall Street giant JP Morgan to raise $5 billion in debt, with the Times saying directors of We would be meeting as soon as Monday afternoon to discuss that.
“WeWork has retained a major Wall Street financial institution to arrange financing,” the Journal reported a company spokesman as saying.
“Approximately 60 financing sources have signed confidentiality agreements and are meeting with the company’s management and its bankers over the course of this past week and this coming week.”
The New York-based startup that launched in 2010 has touted itself as revolutionizing commercial real estate by offering shared, flexible workspace arrangements, and has operations in 111 cities in 29 countries.
However, the company, which lost $1.9 billion last year, has faced skepticism over its ability to make money, especially if the global economy slows significantly.