Arcelik cut to 'B' by Fitch as weaker demand pressures leverage

Highlights

Fitch downgraded Arcelik A.S.'s Long-Term Issuer Default Ratings to 'B' from 'B+' with a Negative Outlook, citing persistently weak trading and delayed deleveraging.
Fitch projects EBITDA gross leverage to reach 6.9x at end-2026, slightly improve to 6.4x by end-2027, both above the previous 5.5x negative rating sensitivity.
Senior unsecured notes rating was cut to 'CCC+' from 'B' due to increased prior-ranking secured debt, with senior secured debt estimated at 55% of total by end-3Q26.

Downgrade reflects weaker trading and slower deleveraging

As reported by Fitch Ratings, Arcelik A.S.'s Long-Term foreign and local currency Issuer Default Ratings are downgraded to 'B' from 'B+', while the Outlooks remain Negative. The company's senior unsecured notes are also lowered to 'CCC+' from 'B', and the Recovery Rating is cut to 'RR6' from 'RR5'.

Fitch says the rating action reflects persistently weak trading conditions, including softer demand in Turkiye and international markets as well as pricing pressure. Those factors lead the agency to revise down its assumptions for Arcelik, citing margin compression, higher external funding needs and weaker credit metrics, with Fitch-calculated EBITDA gross leverage now above earlier projections.

Fitch expects Fitch-adjusted EBITDA gross leverage of about 6.9x at end-2026, improving to about 6.4x at end-2027 and 6.2x at end-2028. That path remains above the agency's previous negative rating sensitivity of 5.5x, with delayed deleveraging linked to slower demand, continued pricing pressure, conflict-related cost pressures, higher operating expenses and increased debt versus earlier forecasts.

Debt structure and margin outlook shape credit risk

An increase in prior-ranking debt also weakens recovery prospects for holders of Arcelik's senior unsecured notes. Fitch says reported senior secured debt at operating companies rises to about 55% of total debt at end-3Q26, up from 45% at end-3Q25, leaving the remaining 45%, including bonds, issued by Arcelik at the holding company level.

Because the secured facilities are guaranteed by the company and rank ahead of holding company debt, Fitch says the shift in capital structure, together with increased factoring and additional debt, supports the lower Recovery Rating and leaves the senior unsecured rating two notches below the Issuer Default Rating.

On operating performance, Fitch forecasts EBITDA margin improving to 6.4% in 2026 from 3.7% in 2025, helped by the inclusion of monetary gains in Fitch-calculated EBITDA before the company's planned adoption of IFRS 18 reporting in 2027. Beyond that, margin improvement in 2027 through 2029 depends on stronger demand, better capacity utilisation and lower raw material prices as the benefit from monetary gains fades in line with Fitch's inflation expectations.

In our earlier article on geopolitical tensions and sovereign borrowing risk, we noted that prolonged conflicts and elevated fiscal spending are testing countries’ credit resilience in a higher-rate environment. We also highlighted that emerging and frontier markets are particularly exposed as higher energy and food prices feed inflation, lift debt-service burdens, and tighten refinancing conditions.

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