OREANDA-NEWS. Fitch Ratings has revised the Outlooks on the Metropolitan Municipality of Istanbul's Long-Term Foreign and Local Currency Issuer Default Ratings (IDR) to Negative from Stable and affirmed the IDRs at 'BBB-'.

Under EU credit rating agency (CRA) regulation, the publication of International Public Finance reviews is subject to restrictions and must take place according to a published schedule, except where it is necessary for CRAs to deviate from this in order to comply with their legal obligations. In this case the deviation was caused by the revision of the Outlooks on Turkey's IDRs to Negative from Stable on 19 August 2016 (see 'Fitch Affirms Turkey at 'BBB-'; Revises Outlook to Negative' at www. fitchratings. com). The next scheduled review date for Istanbul is 23 September 2016

KEY RATING DRIVERS

The revision of the Outlooks reflects the following key rating drivers and their relative weights:

HIGH

Institutional Framework

Following the revision of the Outlook on Turkey's Long-Term Foreign and Local Currency IDRs on 19 August 2016, the Outlooks on Istanbul's Long-Term Foreign and Local Currency IDRs are now equalised with that on the sovereign. Since local and regional governments usually cannot be rated above the sovereign according to Fitch's International Local and Regional Governments Criteria, the Outlooks on Istanbul's IDRs needed to be revised in line with that on Turkey.

The centralised nature of Turkish local governments (municipalities in general) is reflected in the close financial linkage between the central government and the municipalities, exposing them to the country's macro-economic performance and policy and socio-economic conditions. As Istanbul's IDRs are aligned with those of the sovereign, its IDRs and Outlooks are sensitive to any negative rating action or Outlook revision on the sovereign's IDRs.

We previously affirmed Istanbul's IDRs on 1 April 2016.

RATING SENSITIVITIES

Any rating action on Turkey would be mirrored by Istanbul's ratings. Material deterioration of the city's debt servicing capacity as a result of persistent financial instability and further depreciation of the Turkish lira or a deterioration of the budget deficit before debt to more than 10% of total revenues (2015: 6.9%) could also prompt a downgrade, although this is not Fitch's base case scenario.

The rating actions are as follows:

Long-Term Foreign and Local Currency IDRs: affirmed at 'BBB-'Outlooks revised to Negative from Stable

National Long-Term rating: unaffected at 'AAA (tur)'; Outlook Stable

Short-Term Foreign Currency IDR: unaffected at 'F3'