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Fitch Rates Garanti DPR's 2017-C Series 'A-'; Outlook Stable
October 6, 2017 / 3:53 PM / 2 months ago

Fitch Rates Garanti DPR's 2017-C Series 'A-'; Outlook Stable

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Garanti Diversified Payment Rights Finance Company - 2017-C here LONDON, October 06 (Fitch) Fitch Ratings has assigned Garanti Diversified Payment Rights Finance Company's (Garanti DPR) Series 2017-C notes a final rating of 'A-' with a Stable Outlook. The ratings address the likelihood of timely payment of interest and principal. Fitch has also affirmed the outstanding Series 2010-B and -C notes, the Series 2012-A notes, the Series 2013-A, -B, -C, -D and -E notes, the Series 2014-A and -B notes, the Series 2015-A and -B notes, the Series 2016-A, -B, -C, -D and -E notes and the Series 2017 -A and -B notes at 'A-' with a Stable Outlook, following the issuance of the new series. Garanti DPR is a securitisation of diversified payment rights (DPR) originated by Turkiye Garanti Bankasi A.S. (BBB-/Stable/F3). DPRs are payment orders processed by banks and mainly reflect payments due on the export of goods and services, capital flows and personal remittances. Garanti DPR has purchased all present and future DPRs denominated in dollars, euros and pounds from Garanti, financed through issued notes that are secured on the DPRs. The programme has been in existence since 2002. KEY RATING DRIVERS Garanti's Size and Role, Supportive Fitch has a Going Concern Assessment (GCA) score of GC1 for Garanti, based on its position as the second-largest privately owned bank in the financial system and its role in the Turkish economy. The bank had unconsolidated assets of USD80.7 billion as of end-December 2016, representing about 11.0% of total system deposits and 10.9% of total system assets, according to the Banks Association of Turkey. Three-Notch Uplift The GC1 score enables Fitch to apply a three-notch uplift on Garanti DPR's ratings, over the bank's Local-Currency IDR of 'BBB-'. The ratings are driven by the bank's standalone creditworthiness, as well as potential support from its parent Banco Bilbao Vizcaya Argentaria, S.A. (BBVA, A-/Stable), and the notching uplift is supported by the stability, strength and diversification of the flows, the size of the total outstanding notes relative Garanti's overall indebtedness, and strong debt service coverage ratios (DSCRs). Large Programme Size Fitch estimates the outstanding programme debt, including the new notes, represents 4.5% of Garanti's total interest bearing liabilities and 13.8% of total interest bearing liabilities excluding deposits. Garanti has the largest programme size in relation to the bank's overall liabilities among Turkish DPR programmes. The current debt level of the programme is still commensurate with the uplift, but decreasing offshore flow amounts and a further increase in programme debt could translate into rating pressure. More Granular Flows than Peers Garanti has a diverse customer base, with a significant base of both large, top-tier multi-national corporates and medium-sized commercial companies. The top 20 non-Turkish single beneficiaries from January to August 2017 accounted for 12.2% of the total designated depository banks' (DDB) collections, indicating a much lower beneficiary concentration risk than peer programmes. Fitch has assessed the impact of losing these collections and believes the transaction could withstand such a stress. Good Cash Flow Coverage Fitch calculates the monthly collections' DSCRs for the programme at 44x, based on offshore flows processed through DDBs as of end-August 2017. This is well above related early amortisation triggers and in the mid-range of peer programmes. Garanti has the highest offshore flows percentage (over 70%) among Turkish DPR programmes. Also the DDB percentage has been high at around 80% since 2006. The agency tested the sustainability of coverage under various scenarios, including FX- and interest rate-stresses and a reduction in remittances at a given time. The flows are healthy and stable and the DSCRs are adequately above the coverage-related trigger levels set out in the transaction documents. RATING SENSITIVITIES The most significant variables affecting the rating of the transaction are the credit quality of the bank, its GCA score, and the sovereign rating. Although coverage levels are a key input as well, the DSCRs have been relatively consistent and healthy, and therefore the transaction is expected to be able to withstand a significant decline in cash flows without affecting the ratings. Additionally, the ratings of BONY, as the issuer's account bank, may constrain the ratings of the DPR notes, were BONY to be downgraded below the then ratings of the DPR notes with no remedial action taken. Another important consideration that might lead to rating action is the level of future flow debt as a percentage of the bank's overall liability profile and its non-deposit funding. This is factored into Fitch's analysis to determine the maximum notching differential allowed, given the GCA score. The outstanding note balance of the issuer relative to Garanti Bank's liability profile is currently deemed reasonable. Nevertheless, a change in any of these variables would be analysed to assess the possible impact on the transaction's rating. USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10 Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch 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 the DPR flows, nor conducted a review of the origination files because there is no existing asset portfolio to assess in future flow transactions. Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable. SOURCES OF INFORMATION The information below was used in the analysis. - Servicing report for the month ending 31 August 2017. - Information provided by Turkiye Garanti Bankasi A.S. as at 12 September 2017. Contacts: Primary Analyst Yifei He Director +44 20 3530 1259 Fitch Ratings Limited 30 North Colonnade London E14 5GN Committee Chairperson Markus Papenroth Managing Director +44 20 3530 1707 Media Relations: Athos Larkou, London, Tel: +44 203 530 1549, Email: athos.larkou@fitchratings.com. Additional information is available on www.fitchratings.com Applicable Criteria Fitch’s Foreign-Currency Stress Assumptions for Residual Foreign-Exchange Exposures in Covered Bonds and Structured Finance – Excel File (pub. 26 Oct 2016) here Future Flow Securitization Rating Criteria (pub. 13 Sep 2017) here Global Structured Finance Rating Criteria (pub. 03 May 2017) here Structured Finance and Covered Bonds Counterparty Rating Criteria (pub. 23 May 2017) here Structured Finance and Covered Bonds Country Risk Rating Criteria (pub. 18 Sep 2017) here Structured Finance and Covered Bonds Interest Rate Stresses Rating Criteria (pub. 17 Feb 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation 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. 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