JCR Eurasia Rating in its periodic review, has affirmed the ratings and outlook of the Consolidated Structure of ‘Metal Yapı Konut A.Ş.’ and the ‘Cash Flows on Prospective Bond Issue’ as ‘BBB(Trk)/Stable’ on the Long Term National Local Scale. The Short T

JCR Eurasia Rating, in its periodic review, has affirmed the credit ratings of the “Consolidated Structure of Metal Yapı Konut A.Ş. and the ‘Cash Flows on Prospective Bond Issue’ at the investment grade of “BBB(Trk)/Stable” on the Long Term National Scale. In addition, JCR Eurasia Rating has affirmed the Long Term International Foreign and Local Currency Scale as ‘BBB-’. Other notes and details of the ratings are given in the table below:

Long Term International Foreign Currency Rating

:

BBB- / (Stable Outlook)

Long Term International Local Currency Rating

:

BBB- / (Stable Outlook)

Long Term National Local Rating

:

BBB (Trk) / (Stable Outlook)

Long Term National Issue Rating

:

BBB (Trk)

Short Term International Foreign Currency Rating

:

A-3 / (Stable Outlook)

Short Term International Local Currency Rating

:

A-3 / (Stable Outlook)

Short Term National Local Rating

:

A-3 (Trk) / (Stable Outlook)

Short Term National Issue Rating

:

A-3 (Trk)

Sponsor Support

:

2

Stand Alone

:

B

Metal Yapı mainly operates in the field of domestic housing and commercial construction in accordance with the real estate development model. The Company continues to gain an advantage in the tough competitive environment through continuity and diversification of cash flows via the varied sales income of its group companies. With foundations laid out by Ömer Saçaklıoğlu in 2000, Metal Yapı develops inter/national real estate projects and maximizes its market value by completing high value construction projects. Through its strategy of a regular and planned cash flow method, the Company has maintained its efficient and trustworthy position and strengthened its current profile via innovative designs and folding value concept projects created with quality materials and modern construction techniques in cooperation with international architects, high quality real estate assets, and steady rental income. The Company maintains the production, sales and marketing activities in the field of construction and services through its experienced workforce in Istanbul and supports its steady growth via rising personnel numbers. Although the customer portfolio of the Company consists of individuals with high income levels, corporate inter/national large-scale firms, and overseas investors investing in luxury projects, Metal Yapı has widened its sales capability with alternative and efficient payment opportunities, therefore positively differentiating itself from the sector.

The Company’s high-value projects support the stability of cash flows and profit generation, despite the pressure on sector stemming from the two election cycle in 2015 and the loss in value of TRY. In addition, the improvement in housing sales and rental income via ongoing projects, the relief in liquidity management via regular rental incomes supported by long term rent agreements, the buffering of probably cash needs from the high level of previous the year’s profit, strong position of group companies against competition, significantly strengthened profitability derived from the upward acceleration of sales revenue with the delivery of the completed project, accelerated sales revenue with the delivery of completed projects strengthening the profitability, low level of impaired receivables continuing to support the asset quality despite the high share of increasing trade receivables among total assets, high quality of real estate assets and strong brand identity all continue to be positive factors considered in the determination of the Company’s notes. The Company’s equity significantly increased in 2016 as the main shareholder of related company Karmen Yapı A.Ş., Ömer Saçaklıoğlu, sold his shares to Metal Yapı and added a portion of the Company’s receivables to capital.

On the other hand, the volatile structure of profitability ratios, stress of off balance sheet guarantees and commitments on the asset structure, pressure on liquidity management from the decreasing net working capital, probable pressure on Company’s internal equity generation capacity related with the real estate sales ability and in parallel the downwardly accelerated equity level, effect of the short FX position and increased interest expenses on financing expenses stemming from increased borrowings, negative effect of the high level of short term borrowings on the net working capital, and pressure on housing loans in the construction sector stemming from drops in the Turkish Lira due to ongoing macro level political and economic uncertainty and accelerated interest rates are the factors stressing on Company grades and are behind the affirmation of the Company’s Long-Term National Rating as ‘BBB (Trk)’ and the Short-Term National Rating as ‘A-3 (Trk)’ by JCR Eurasia Rating. In addition, as the Group’s assets are heavily composed of real estate and stocks along with the situation of stable rental income, their market value is dependent on economic conjuncture and asset quality is subject to the future economic environment.A separate rating report has not been compiled as the resources obtained from the bond issue will be carried in the Company’s balance sheet and was subject to analysis in the corporate credit rating report. The planned bond issue carries no difference in comparison to the Company’s other liabilities with respect to its legal standing and collateralization, as such the notations outlined in the corporate credit rating report also reflect the issue rating.

The improved effect on the net working capital through the forecasted revenue and cash from Blue Lake, Levent Tower, and the Göktük projects; funding diversification via projected bond issuances and borrowing from international institutions; projected relieving of short and medium term liquidity management through the extension of short term liabilities into long maturities; expected decrease in financing expenses, positive contribution to profit, and softened FX risk with the initiation of swap and forward hedging techniques considering the foreign currency-weighted borrowing structure; attainability of the Company’s future growth plan; and generation of internal resources and cash flows to meet debt payments are factors that will be watched by JCR Eurasia Rating and play a role in affirmation of Short and Long term outlooks as ‘Stable’.

Although it is assumed that Ömer Saçaklıoğlu, possessing almost full power of control, has sufficient propensity and operational support capability as the result of his experience dating back to before the establishment of Metal Yapı Konut A.Ş., his financial support capacity is not known. Considering the increase in equity, the Group’s ‘Sponsor Support Grade’ has been defined as (2), indicating an ‘adequate level’. On the other hand, regardless of the support from its shareholders, taking into consideration the Company’s increasing rental income, the supported sales revenue through gas station and mall management, the expected increase in revenue and cash with the completion of projects, and liquid portfolio, it is considered that Metal Yapı Konut A.Ş. has reached a level of experience to manage the incurred risks on its balance sheet provided that the current customer base and effectiveness in the market is preserved along with the maintenance of current macro-economic conditions. In the light of such circumstances, Metal Yapı Konut A.Ş. has been assigned a Stand Alone grade of (B) on JCR Eurasia Rating’s notation system, denoting an adequate level.

For more information regarding the rating results, you may visit our internet site http://www.jcrer.com.tr or contact our analysts Ms. Merve HAYAT.

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