Fitch Revises 3 Turkish DPR Programmes' Outlook to Negative; Affirms 7 DPR Programmes
The DPR programmes are A. R.T. S. Ltd. (ARTS, originated by Akbank T. A.S.; rated BBB-/Negative/F3), Bosphorus Financial Services Limited (Bosphorus, originated by Finansbank A. S.; rated BBB/Negative/F2), DFS Funding Corp. (DFS, originated by Denizbank A. S.; rated BB+/Stable/B), Garanti Diversified Payment Rights Finance Company (Garanti DPR, originated by Turkiye Garanti Bankasi A. S.; rated BBB/Negative/F2), TIB Diversified Payment Rights Finance Company (TIB DPR, originated by Turkiye Is Bankasi A. S.; rated BBB-/Negative/F3), VB DPR Finance Company (VB DPR, originated by Turkiye Vakiflar Bankasi T. A.O.; rated BBB-/Negative/F3) and Yapi Kredi Diversified Payment Rights Finance Company Ltd Company (Yapi DPR, originated by Yapi ve Kredi Bankasi A. S.; rated BBB/Negative/F2).
The review followed the recent rating actions on Turkish banks (see 'Fitch Revises 18 Turkish Banks' Outlooks to Negative on Sovereign Change' dated 25 August 2016 at www. fitchratings. com), which followed the revision of the Outlook on Turkey's sovereign IDRs (see 'Fitch Affirms Turkey at 'BBB-'; Revises Outlook to Negative' dated 19 August 2016).
The DPR programmes are offshore future flow securitisations backed by bank's generation of hard currency flows arising from DPRs. DPRs are payment orders processed by banks mainly reflect payments due on the export of goods and services, capital flows and personal remittances.
KEY RATING DRIVERS
The revisions on the Outlooks on ARTS, VB DPR and Yapi DPR are driven by the Negative Outlook on the banks and the sovereign. The debt service coverage ratios (DSCR) remain sufficient, but any further significantly decline in flows will put the ratings under pressure.
The Outlooks on Garanti and TIB remain Stable due to particularly strong DSCR coverage ratios, which we believe will withstand a significant decline in flows. The Outlook on Bosphorus remains Negative and the Outlook on DFS Funding Stable as there has been no change in the Outlook of the originator bank nor has there been a material change in underlying flows. Fitch maintains the GCA scores assigned to the originating banks and the current notching uplift allowed by the GCA scores and the other rating drivers including ratio DPR debt to total liabilities, the diversified flow volume and sufficient DSCR.
Fitch calculated the DSCRs as 49x (ARTS), 97x (Garanti DPR), 87x (TIB DPR), 51x (Yapi DPR), 40x (VB DPR), 24x (Bosphorus DPR) and 43x (DFS). The Fitch calculated DSCR is based on offshore flows processed via designated depository banks as of end-July 2016 and incorporating Fitch's interest rate stresses at the corresponding rating. The current DSCRs of all programmes are well above the trigger ratios in the transaction documents.
DPR volumes in 1H16 suggest the declining trend is likely to continue in 2016 and the failed coup attempt of 15 July has escalated risks to Turkey's economy, which we expect to put further pressure on DPR volumes.
The most significant variables affecting the transactions' ratings are the credit quality of the originating bank, the impact of the parent on the bank's Long-Term Local Currency IDR, the GCA score, and DSCR. A change in any of these variables will be analysed for their impact on the transaction's ratings.