Fitch Rates TIB Diversified Payment Rights Finance Company's Series 2015-G Note 'A-'/Stable
OREANDA-NEWS. Fitch Ratings has assigned TIB Diversified Payment Rights Finance Company's Series 2015-G Note a final 'A-' rating with Stable Outlook. The rating addresses the likelihood of timely payment of interest and principal.
Fitch has also affirmed the outstanding A, -B, -C, and -D notes, of Series 2011, 2012 and 2013, A, -B, -C notes of Series 2014 and A, -B, -C, -D, -E and -F of series 2015 at 'A-' with a Stable Outlook, following the issuance of the new series.
TIB DPR is a future flow transaction of DPRs originated by Turkiye Is Bankasi A.S. (Isbank, 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. TIB DPR has purchased all present and future US dollar-, euro-, and sterling-denominated DPRs from Isbank, financed through issued floating rate notes backed by DPRs. The programme has been in existence since 2004.
KEY RATING DRIVERS
GCA Score Supports Rating
Isbank's Going Concern Assessment (GCA) score of 1 (GC1), indicating its relative importance to the Turkish financial system, remains unchanged, based on its position as the largest privately owned bank and its role in Turkey's economy. Isbank had unconsolidated assets of USD99.9bn as of June 2015, representing about 12.8% of total loans and receivables, according to the Banks Association of Turkey.
The GC1 score enables Fitch to apply a three-notch uplift on the ratings of DPR notes over Isbank's local currency IDR of 'BBB-' given that the ratings are underpinned by the stability, strength and composition of the flows, size of the total outstanding notes relative to Isbank's overall liabilities, strong debt service coverage ratios (DSCRs) and Isbank's sound standalone viability.
Sovereign Risk Reduced
When contemplating ratings above a country's Long-term IDR, Fitch considers potential sovereign risk events consistent with the rating. These risks include transfer and convertibility, devaluation and, to some degree, nationalisation and expropriation.
Any controls on transfer or conversion of foreign exchange are limited in this transaction, as payments from the obligors are collected offshore. Fitch evaluated the potential for payment diversion risk in this transaction and believes this risk is significantly reduced on several levels such as acknowledgement agreements signed by specified correspondent banks.
Fitch expects monthly DSCRs for the programme to be around 90x after the new issuance, considering only offshore flows processed through designated depositary banks (DDBs) other than Isbank AG - a fully-owned subsidiary of Isbank - and thereby excluding domestic flows.
The agency tested the sustainability of coverage under various scenarios, including FX- and interest-rate stresses and a reduction in remittances at any time. The flows are strong and the DSCRs are more than adequately above all key trigger levels set out in the transaction documents.
Reasonable Programme Size
Fitch estimates the new series, in combination with the outstanding notes, represent about 2.4% of Isbank's total liabilities and 5.0% of total liabilities when customer deposits are excluded. The current relative leverage is in line with the levels seen in peer programmes.
True Sale and Acknowledgements
Under the true sale agreement between Isbank (the seller) and the issuer, the seller has sold to the issuer all the rights to, title to, and interest in existing and future DPRs. Selected correspondent banks have executed irrevocable acknowledgement agreements, giving the trustee control over flows from such correspondent banks.
The most significant variables affecting the rating of the transaction are the intrinsic credit quality of the bank, its GCA score, and the sovereign rating. Additionally, the ratings of The Bank of New York Mellon Corporation (BONY) as the issuer's account bank may constrain the ratings of DPR notes if BONY was rated below the then ratings of DPR notes and no remedial action was taken.
Although coverage levels are also a key input, the DSCRs have been consistently high, and therefore the transaction should be able to withstand a significant decline in cash flows without affecting the ratings. Nevertheless, any material change in any of these variables would be analysed in a rating committee to assess the possible impact on the transaction's rating.
A new issue report outlining Fitch's analysis of TIB DPR is available at www.fitchratings.com or by clicking the link above.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
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.