OREANDA-NEWS. Fitch Ratings has upgraded Bosphorus Financial Services Limited's (Bosphorus) Series 2015-A, - B, - C and - D notes, Series 2012-B, - C, and - D notes to 'A-' from 'BBB+'. The Outlooks are Stable.

Bosphorus is a securitisation of diversified payment rights (DPR) originated by Finansbank A. S. (Finansbank; BBB/Stable/F3). DPRs are essentially payment orders processed by banks which can arise for a variety of reasons but mainly reflect payments due on the export of goods and services, capital flows and personal remittances. Bosphorus has purchased all present and future DPRs denominated in dollar, euro and pound from Finansbank, financed through issued notes that are secured by the DPRs. The programme has been in existence since 2000.

KEY RATING DRIVERS

The upgrade reflects Fitch's recent upgrade of Finansbank' local currency Issuer Default Ratings (LC IDR) to 'BBB' from 'BBB-' and the revision of its Going Concern Assessment (GCA) score to GC2 from GC3, following the acquisition of the bank's 99.81% stake by Qatar National Bank (QNB, AA-/Stable). Both the LC IDR and GC score are driven by parent support and Finansbank's upgrade was based on Fitch's view that QNB is very likely to provide support to its Turkish subsidiary, should it be required (see 'Fitch Upgrades Finansbank on Ownership Change', dated 20 June 2016 at www. fitchratings. com). Finansbank's Viability Rating - a measure of the intrinsic creditworthiness of the financial institution irrespective of external support - is unaffected at 'bbb-'.

The GC2 score allows for a maximum uplift of the DPR programme's ratings of four notches above the LC IDR of the originator. The notching uplift is limited to two to three notches for investment-grade rated entities such as Finansbank, according to Fitch's Future Flow Securitisation Criteria. Furthermore, Fitch has tempered the DPR rating's notching differential from the bank's LC IDR to one notch as the bank's IDR already benefits from parent support.

The DPR flows of Bosphorus have declined since 2014 mainly due to general macro-trends in and around Turkey (eg currency fluctuations, slow recovery in Europe, worsening geopolitical environment such as Turkey's involvement in the conflict in Syria, the breakdown of the Kurdish peace process, Russian sanctions to Turkey). However, no sharp and permanent drop is expected in Turkish exports and DPR volumes in the near term. The total collections for 2015 were USD29.2bn (a reduction of 14% on 2014) and USD12.7bn in the five months to June 2016, indicating the downward trend in the DPR volume is likely to reverse this year. The Turkish local flow comprises a significant share of total collections. Since 2013, local flow made up 70% to 80% of the total flows.

The programme has continued to benefit from reasonable coverage ratios, despite the reduction in flow amounts during 2015. The quarterly and monthly tested collections debt service coverage ratios (DSCRs) were around 30x as of May 2016, well above the early amortisation trigger levels of 6x and 4x, respectively. The proportion of quarterly collections from designated depository banks, which signed irrevocable acknowledgement agreements, has been around 70% since the beginning of 2016, above the 60% trigger. All other early amortisation trigger tests were also passed comfortably.

RATING SENSITIVITIES

The most significant variables affecting the notes' ratings are Finansbank's LC IDR, its GCA score, and the Turkish sovereign rating (BBB-/Stable). Although coverage levels are a key input as well, the DSCRs have been consistently high, and therefore the transaction should be able to withstand a significant decline in cash flows without it affecting the ratings.

Additionally, the ratings of The Bank of New York Mellon (BONY, AA/Stable/F1+) as the issuer's account bank may constrain the ratings of the DPR notes, if BONY were rated below the then ratings of the DPR notes and no remedial action was taken. Nevertheless, we would analyse any change in any of these variables to assess the possible impact on the transaction's ratings.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the DPR programme. There were no findings that were material to this analysis. Fitch has neither requested any third party assessment of the information about DPR flows nor conducted a review of origination files because there is no existing asset portfolio to assess in future flow transactions.