S&P takes Erdemir off negative watch

Standard & Poor's said it removed its ratings on Turkey-based Eregli Demir ve Celik Fabrikalari TAS (Erdemir) from CreditWatch, where they had been placed with negative implications on Oct. 5. S&P also affirmed the company's BB- long-term ratings.

The outlook is negative.

The CreditWatch resolution follows the completion of the privatization of Erdemir. The Turkish government has agreed to sell its 49% stake in Erdemir to special-purpose vehicle ATAER, which is expected to be 59% owned by Turkish conglomerate Ordu Yardimlasma Kurumu (BB-/stable) and 41% by Arcelor SA (BBB/developing watch).

The negative outlook reflects S&P's concerns that Erdemir will endure negative free cash flows for the next few years due to its heavy capital expenditure plans combined with an expected need to pay higher dividends to its new owners to service the special-purpose vehicle's heavy debt burden.

The rating on Erdemir continues to reflect the risks associated with a restructuring and growth plans, as well as the country risk of the Republic of Turkey (BB-/positive), the agency said.

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