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May 15 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Garanti Diversified Payment Rights Finance Company’s (Garanti DPR) Series 2014-B notes a final rating of ‘A’, with a Stable Outlook.
Fitch has also affirmed the outstanding Series 2014-A notes, Series 2013-A, -B, -C, D and -E notes, Series 2012-A notes, Series 2011-A and -B notes, and Series 2010-B, -C and -D notes at ‘A’ with a Stable Outlook, following the issuance of the new series.
Fitch has not assigned credit ratings to the simultaneously issued Series 2014-C, as the series is wrapped by Assured Guaranty Corp. on which Fitch does not maintain a credit rating. However, the agency has considered its impact on the whole diversified payment rights (DPR) programme in its rating analysis.
Garanti DPR is a securitisation of DPR originated by Turkiye Garanti Bankasi A.S. (Garanti, BBB/Stable/F3). DPRs are payment orders processed by banks and mainly reflect payments due on the export of goods and services, capital flows and personal remittances. Garanti DPR has purchased all present and future DPRs denominated in dollars, euros and pounds from Garanti, financed through issued notes that are secured on the DPRs. The programme has been in existence since 2002. However, Fitch only began rating notes issued by the programme in 2010.
The notes’ ratings primarily reflect Garanti’s ‘BBB’ local currency Issuer Default Rating, Fitch’s going concern assessment (GCA) score on the bank and the transaction’s consistently high monthly debt service coverage ratios (DSCRs). Any controls on transfer or conversion of foreign exchange are expected to be mitigated in this transaction, as payments from the obligors are collected offshore. Investors remain exposed to the risk that future DPRs could fall, or flows are diverted, leading to the issuer having insufficient collections available to service the debt. Fitch has analysed these risks by stressing the cash flows and considers the programme would be able to withstand a substantial drop in collections without the notes’ ratings being affected.
Fitch maintains a GCA score of ‘GC1’ on the bank. This indicates that liquidation of the bank is extremely remote upon an entity default in a stressful environment. This is based on its position as the second-largest privately owned bank in the financial system by lending assets and its role in the Turkish economy, with significant market shares across all business segments. As of end-2013, Garanti had USD93.2bn in assets, representing about 11.8% of total system assets, according to the Banks Association of Turkey.
Fitch expects current monthly tested DSCRs for the programme to be about 75x after the new issuance which gives limited credit to domestic flows. However, the agency’s analysis only considers flows through designated depositary banks and excludes domestic Turkish flows and branch flows. In addition, Fitch applies stress scenarios to the flow volume commensurate with the ‘A’ rating to test the adequacy of the coverage. The flows are strong and the DSCRs are comfortably above all key trigger levels set out in the transaction documents.
Fitch estimates that Garanti’s DPR programme (including the new issuance) represents about 4.2% of the bank’s total liabilities and 9.6% of total liabilities excluding customer deposits on a consolidated basis. Garanti’s future flow debt as a percentage of its overall liabilities is the highest among future flow programmes in Turkey.
The most significant variables affecting the transaction’s rating are the credit quality of the bank, its GCA score, and the sovereign rating (BBB-/Stable).
Although coverage levels are also a key input, the DSCRs have consistently been high, and therefore the transaction is expected to be able to withstand a significant decline in cash flows without it affecting the ratings.
Nevertheless, Fitch will analyse any change in any of these variables to assess the possible impact on the transaction’s rating.
A new issue report outlining Fitch’s analysis of the new and existing series is available at www.fitchratings.com or by clicking the link below.
Link to Fitch Ratings’ Report: Garanti Diversified Payment Rights Finance Company â€“ Series 2014-B