(Repeat for additional subscribers)
April 16 (The following statement was released by the rating agency)
Fitch Ratings has assigned Turkiye Finans Katilim Bankasi A.S.'s (Turkiye Finans)
forthcoming Sukuk issue an expected rating of 'BBB(EXP)'.
Turkiye Finans is the originator of the Sukuk; and, certificates will be issued
by a fully-owned SPV established in Turkey. The SPV will use 51% of the proceeds
to acquire the beneficial interests and rights in a pool of leasing assets from
Turkiye Finans. The profit from these assets will be distributed to the Sukuk
investors. Turkiye Finans (as managing agent) will actively manage this
portfolio and ensure that profits are in line with the entire expected return on
the Sukuk. The remaining 49% of the proceeds will be used to execute a
commodities-based murabaha transaction between the SPV and Turkiye Finans.
KEY RATING DRIVERS
The 'BBB(EXP)' expected rating assigned to the Sukuk is driven solely by Turkiye
Finans' Long-term foreign currency Issuer Default Rating (IDR) of BBB' as the
Sukuk structure is viewed as an originator-backed/asset-based structure.
According to Fitch's criteria, the Sukuk rating is directly linked to Turkiye
Finans' Long-term IDR.
The originator backing is based on: i) Turkiye Finans's payment and performance
obligations under the Sukuk transaction documents ranking pari passu with its
other future or present senior unsecured debt obligations; ii) Turkiye Finans's
irrevocable undertaking to purchase the relevant leasing assets from the SPV and
settle the murabaha transaction, including the agreed profit rate, on the
scheduled or any earlier dissolution dates; and iii) on any periodic
distribution date, Turkiye Finans (as managing agent) is obliged to actively
manage and generate the necessary returns from the Sukuk assets that would be
sufficient to cover the periodic distribution payments to Sukuk holders. A
failure to do so would trigger a dissolution event and enforce Turkiye Finans to
pay the entire sum of the outstanding deferred sale price (which also includes
the unpaid portion of the profits).
Fitch understands that certificate holders have a beneficial interest in the
cash flows generated by the underlying assets, but do not have recourse to those
assets. As such, the sukuk are asset-based not asset-backed.
By assigning a rating to the issue, Fitch does not express an opinion on the
Sukuk structure's compliance with Shariah principles or whether the relevant
transaction documents are enforceable under any applicable law, including,
without limitation, English and Turkish law.
Fitch would expect the Sukuk rating to move in tandem with, and be sensitive to
any change in, Turkiye Finans' Long-term foreign currency IDR, which is, in
turn, driven by Fitch's view of potential support from its majority shareholder.
Turkiye Finans engages in interest-free banking - primarily with SMEs and
corporate clients. It is a small but growing bank, owned 66.3% by the The
National Commercial Bank ('A+'/Stable) of Saudi Arabia.
Turkiye Finans is currently rated as follows:
Long-term foreign currency IDR 'BBB'; Outlook Stable
Long-term local currency IDR 'BBB+'; Outlook Stable
Short-term foreign currency IDR 'F3'
Short-term local currency IDR 'F2'
National Long-term rating 'AAA(tur)'; Outlook Stable
Viability Rating 'bb-'
Support Rating '2'