S&P downgrades Erdemir

Standard & Poor's said it lowered to B from BB- the long-term corporate credit rating on Eregli Demir ve Celik Fabrikalari TAS.

This reflects a combination of sharply deteriorating conditions in global steel markets and heightened liquidity risks arising from Erdemir's reliance on short-term uncommitted bank financing at a time of turbulence in the credit markets.

The outlook remains negative.

S&P said the downgrade reflects Erdemir's weak liquidity and high exposure to refinancing risks, which is a key negative rating factor.

At year-end 2008, adjusted debt-to-EBITDA ratio stood at 2.5x.

The rating reflects the cyclical and capital-intensive nature of the industry, raw material cost pressures, concentration on an increasingly competitive domestic market and country risks in the Republic of Turkey (foreign currency BB-/negative/B; local currency BB/negative/B), the agency said.

The rating is supported by Erdemir's leading domestic market position and well-diversified customer base, the agency noted.

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