October 18, 2016 / 4:51 AM / 3 years ago

Fitch Rates Kuveyt Turk's Sukuk 'BBB(EXP)'

(The following statement was released by the rating agency) LONDON, October 18 (Fitch) Fitch Ratings has assigned Kuveyt Turk Katilim Bankasi A.S.'s (Kuveyt Turk) proposed US dollar-denominated sukuk certificates, to be issued by KT Kira Sertifikalari Varlik Kiralama A.S (KKSVK), an expected 'BBB(EXP)' rating. The expected rating is in line with Kuveyt Turk's Long-Term Issuer Default Rating (IDR) of 'BBB', which has a Negative Outlook. The assignment of the final rating is contingent on the receipt of final documents conforming to information already received. KKSVK is the issuer and certificate holders' agent in respect of the sukuk. KKSVK is incorporated in accordance with the laws of, and formed and registered in, Turkey as an asset leasing company. KKSVK's ongoing activities will principally be the issue of lease certificates (including the sukuk certificates). KKSVK is wholly owned by Kuveyt Turk. KEY RATING DRIVERS The certificates' rating is driven solely by Kuveyt Turk's Long-Term IDR of 'BBB'. This reflects Fitch's view that a default on the certificates will happen only if Kuveyt Turk defaults on its senior, unsecured obligations under the transaction structure. Fitch has not considered any underlying assets or collateral provided, as we believe that the issuer's ability to satisfy payments due on the certificates will ultimately depend on Kuveyt Turk fulfilling its payment obligations to the issuer described in the prospectus and other supplementary documents. In addition, we believe Kuveyt Turk would have a high propensity to ensure repayment of the KKSVK certificates. In Fitch's view, Kuveyt Turk would also be required to ensure full and timely repayment of KKSVK's obligations due to Kuveyt Turk's various roles and obligations under the sukuk structure and documentation, especially - but not limited to - the features explained below: - Prior to each periodic distribution date, Kuveyt Turk, as the managing agent, will pay to the certificate holders' agent an amount equal to the periodic distribution amounts payable by the issuer under the certificates on such periodic distribution date. Kuveyt Turk can also take other measures to ensure that there is no shortfall and that funding and the portfolio income are redeemed in full. - On the scheduled termination date or upon the occurrence of a termination event or total loss event, the certificate holders' agent will have the right under the purchase and asset portfolio undertaking to require Kuveyt Turk to purchase the asset portfolio for a price sufficient to fund the termination distribution amount payable by the issuer under the certificates. The termination distribution amount equals is the sum of the aggregate outstanding face value amount of the certificates, all accrued and unpaid periodic distribution amounts in respect of such certificates and any outstanding management expenses. - The payment obligations of Kuveyt Turk under the transaction documents will constitute direct, unconditional, unsecured and general obligations of Kuveyt Turk and shall rank at least pari passu with all other unsecured, unsubordinated and general obligations of Kuveyt Turk. The documentation includes a negative pledge provision that is binding on Kuveyt Turk, as well as financial reporting obligations, covenants, Kuveyt Turk event (including cross default) and change of control clause. Certain aspects of the transaction will be governed by English law while others will be governed by Turkish law. Fitch does not express an opinion on whether the relevant transaction documents are enforceable under any applicable law. However, Fitch's rating on the certificates reflects the agency's belief that Kuveyt Turk would have a strong propensity to stand behind its obligations. In assigning ratings to the certificates, Fitch does not express an opinion on their compliance with sharia principles. RATING SENSITIVITIES The rating is sensitive to changes in Kuveyt Turk's Long-Term IDR. Contact: Primary Analyst Lindsey Liddell Director +44 20 3530 1008 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Ahmet Kilinc Analyst + 44 203 530 1272 Committee Chairperson James Watson Managing Director +7 495 956 9901 Global Head of Islamic Finance Bashar Al-Natoor Director +971 4 424 1242 Media Relations: Elaine Bailey, London, Tel: +44 203 530 1153, Email: elaine.bailey@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Country Ceilings (pub. 16 Aug 2016) here Criteria for Rating Sukuk (pub. 16 Aug 2016) here Global Bank Rating Criteria (pub. 15 Jul 2016) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here _id=1013274 Solicitation Status here Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. 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