Fitch Affirms Industrial DPR Funding Ltd. at 'BBB'; Rates Series 2016 'BBB(exp)'
OREANDA-NEWS. Fitch Ratings has affirmed all outstanding series issued by Industrial DPR Funding Ltd and assigned expected ratings to the proposed $250 million series 2016 notes to be issued under the same program. A full list of rating actions follows at the end of this release.
The future flow program is backed by existing and future U.S. dollar-denominated diversified payment rights (DPRs) originated by Banco Industrial S.A. (BI). The majority of DPRs are processed by designated payment banks (DPBs) that have signed acknowledgement agreements (AAs). Upon issuance of the series 2016 notes, the total program size will be approximately $815.6 million. Fitch's ratings address timely payment of interest and principal on a quarterly basis
KEY RATING DRIVERS
Originator Credit Quality: Fitch affirmed BI's local currency (LC) Issuer Default Rating (IDR) at 'BB/Outlook Stable' on May 15, 2015. BI's viability rating (VR 'bb') drives its IDR. BI's strong franchise, stable business model, sound asset quality and good profitability balance the bank's moderate capitalization and high loan concentrations.
Going Concern Assessment Score: Fitch assigns a going concern assessment (GCA) score of 'GC1' to BI, reflecting the bank's systemic importance as the largest financial institution in Guatemala.
Level of Future Flow Debt: The future flow program, including all outstanding series and the proposed 2016 notes, will represent approximately 8.8% of BI's liabilities. While Fitch is comfortable with this level at the assigned rating, the program size/liabilities ratio is relatively high compared with similar transactions in the region. If program leverage increases significantly, it could constrain the future flow ratings.
Strong Program Performance: DDB flows supported an average maximum monthly debt service coverage ratio (DSCR) of 67.0x during 2015 (58.0x expected at closing in December 2013). Fitch's maximum monthly DSCR considers DPB flows and the maximum periodic debt service over the life of the program.
Moderate Expected DSCRs: Fitch's expected quarterly DSCR, which considers average quarterly DPB collections from 2013-2015 and the maximum quarterly debt service for the life of the program, is approximately 50.0x.
Sovereign/Diversion Risks Reduced: The structure mitigates certain sovereign risks by collecting cash flows offshore until investors are paid, allowing the transaction to be rated over the sovereign country ceiling. Fitch believes payment diversion risk is mitigated by the AAs signed by specific correspondent banks.
The future flow program ratings are sensitive to changes in the credit quality of BI, the performance of the DPR business line, and changes in the sovereign environment. The expected quarterly DSCR is estimated to be 50.0x, and, therefore, should be able to withstand a significant decline in cash flows in the absence of additional issuance. A sensitivity analysis was run on the strength of collections and the expected interest rate to be paid on the floating-rate notes. Severe reductions in coverage levels could result in rating downgrades. Any change in these variables will be analyzed in a rating committee to assess the possible impact on the transaction ratings.
DUE DILIGENCE USAGE
No third-party due diligence was provided to or reviewed by Fitch in relation to this rating action
Fitch has affirmed the following ratings:
--$50 million series 2011-1 due 2018 at 'BBB'; Outlook Stable;
--$40 million series 2011-2 due 2018 at 'BBB'; Outlook Stable;
--$60 million series 2011-3 due 2021 at 'BBB'; Outlook Stable;
--$30 million series 2011-4 due 2021 at 'BBB'; Outlook Stable;
--$20 million series 2013-1 due 2018 at 'BBB'; Outlook Stable;
--$30 million series 2013-2 due 2023 at 'BBB'; Outlook Stable;
--$250 million series 2013-3 due 2025 at 'BBB'; Outlook Stable;
--$150 million series 2013-4 due 2023 at 'BBB'; Outlook Stable.
Fitch has assigned the following expected ratings:
--Series 2016-1 due 2021: 'BBB(exp)'; Outlook Stable;
--Series 2016-2 due 2023: 'BBB(exp)'; Outlook Stable;
--Series 2016-3 due 2026: 'BBB(exp)'; Outlook Stable.