Fitch Affirms Dogus Holding's Ratings; Outlook Stable

LONDON/FRANKFURT/ISTANBUL, May 12 (Fitch) Fitch Ratings, the international rating agency, has today affirmed Dogus Holding A.S ("Dogus") Senior Unsecured foreign and local currency ratings at 'B+'. The Outlook is Stable.

The ratings reflect the relatively low up-streaming of dividends from

Operating companies in to Dogus and the debt of the holding company, which in Fitch's view needs to be materially reduced. Accelerated de-leveraging could only be funded through share offerings or fixed asset sales in the short term and cash dividends might increase only in the medium term. Dogus' standalone debt slightly decreased to USD645 million at FYE04 (from USD682m in FYE03) mainly from share and fixed asset disposals and is expected to fall further in 2005 through additional disposals. Market capitalisation of Dogus-owned shares in the operating companies was USD2933m, exceeding their book values and covering 4.6 times the standalone debt as of 31 December 2004 providing some comfort. The ratings of Turkiye Garanti Bankasi ("Garanti"), rated 'BB-' ('BB minus), have also been factored into the company's standalone ratings as the majority of the group's cash generating base is sourced from Garanti. However, Garanti is rated one notch higher than Dogus in order to reflect the structural subordination that lenders in Dogus have compared to those in Garanti.

Expected cash dividends to the holding company are at around USD18.8m from Dogus Otomotiv Servis ve Ticaret A.S. ("DOAS") in 2005 and about USD70m from DOAS and Garanti combined in 2006. Dogus has unused committed credit lines of USD200m which provides some financial flexibility. The presence of Garanti in the group is believed to provide a degree of financial flexibility meaning an easier access to a diversified base of lenders due to bank's strong name and bank's historical good reputation in the international financial markets. Of the standalone debt, 75% matures within two years, creating rollover risk in adverse economic conditions. To reduce this risk, Dogus has commenced spreading this debt to longer maturities in H105.

Dogus has a favourable profile in the Turkish financial sector. Partial

Disposal of the company's significant assets, would provide the holding company with a potential tool for debt repayment. In recent years, Dogus has gradually disposed of its shares in operating companies to de-leverage at the stand alone holding company level. Fitch believes that Dogus still pursues with this strategy and the latest efforts to find possible partners for Tansas and Garanti supports the agency's view. Fitch expects Dogus to dilute its shareholdings below majority in

Garanti or Tansas but to seek ways to secure its management control or remain as an influential shareholder in case a partnership is formed. Fitch will assess the impact of possible share dilutions on a case by case basis depending on whether or not the disposal receipts are used to repay stand alone debt, Dogus retains its management control and the dividend generation base remains sufficient.

Dogus group's performance in 2004 improved when compared with 2003:

Consolidated revenues increased to TRY7,932 billion from TRY6,482bn, and operating profit almost quadrupled to TRY821bn. However, the agency does not regard this improvement to be sufficient for any rating upgrades. Fitch views the de-leveraging at the holding company level and presence of a more predictable and stable dividend stream from operating companies in to the holding company as important requirements for a change in Dogus's ratings in the short to medium term. The group continues to diversify away from financial services, but the finance segment driven by Garanti still forms 52% of the group's consolidated

revenues, 86% of the group's EBITDA and 82% of market capitalisation of Dogus owned shares as of FYE04.

Founded in 1975 and wholly owned by the Sahenk family, Dogus is the parent company of the Dogus Group a diversified Turkish conglomerate with interests in a variety of financial services (including banking, leasing, factoring and insurance), automotives, food retail, construction, tourism and media.

Contact: Kaan Kiziroglu, Istanbul, Tel: +90 (212) 279 1065; Karsten

Frankfurth, Frankfurt, Tel: +49-(69)-7680-76170; Gulcin Orgun, +90 (212) 279 1065.

Media Relations: Alex Clelland, London, Tel: +44 20 7862 4084.

Thursday, 12 May 2005 12:12:06

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