OREANDA-NEWS. Fitch Ratings has assigned A. R.T. S. Ltd.'s (ARTS) Tranche 48-56 'A-' ratings with a Stable Outlook. The ratings address the likelihood of timely payment of interest and principal.

Fitch has also affirmed the ratings on the outstanding tranches (Tranche 24, 28, 29, 30, 33, 34, 35, 36, 37, 39, 40, 41, 42, 43, 44, 45 and 46) at 'A-' with a Stable Outlook, following the issue of new debt. The agency does not rate the remaining outstanding tranches (Tranche 27, 31 and 32) but has considered their impact on the diversified payment rights (DPR) programme.

ARTS is a future flow transaction of DPRs originated by Akbank T. A.S. (BBB-/Stable/F3). DPRs are essentially payment orders processed by banks, which can arise from a variety of reasons but mainly reflect payments due on the export of goods and services, capital flows and personal remittances. ARTS has purchased all present and future US dollar-, euro-, UK pound - and Swiss franc-denominated DPRs from Akbank, financed through issued debt backed by the DPRs. The programme has been in existence since 1999.

KEY RATING DRIVERS

GCA Score Supports Rating

Fitch has a Going Concern Assessment (GCA) score of GC1 on Akbank, based on its position as the third-largest privately owned bank in the financial system and its role in the Turkish economy. Akbank had unconsolidated assets of USD80.5bn at end-2015, representing about 11.1% of total deposits and 9.7% of total system assets, according to the Banks Association of Turkey.

Three-Notch Uplift

The GC1 score allows Fitch to apply a three-notch uplift on ARTS' ratings over Akbank's Long-Term Local-Currency Issuer Default Rating (IDR) of 'BBB-'. The IDRs are driven by the bank's standalone creditworthiness, as reflected in its 'bbb-' Viability Rating; the notching uplift is supported by the stability, strength and diversification of the DPR flows, size of the total outstanding notes relative to Akbank's overall indebtedness and strong debt service coverage ratios (DSCRs).

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. In Fitch's opinion, the payment-diversion risk is significantly mitigated on several levels by acknowledgement agreements signed by specified correspondent banks (SCBs), among others.

Reasonable Coverage Levels

Fitch estimates the DSCR of the programme's monthly adjusted collections to be 42x, based on offshore flows processed through SCBs as of May 2016. This is well above the related early amortisation triggers and in the lower range of peer programmes.

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 the DSCRs are adequately above coverage-related trigger levels set out in the transaction documents.

Large Programme Size

Fitch estimates the programme represents about 4.2% of Akbank's total liabilities and 10.5% of total liabilities excluding customer deposits. These levels are deemed high by the agency.

True Sale and Acknowledgements

ARTS is a special-purpose corporation (SPC) and has entered into a remittances purchase agreement with Akbank to purchase all rights to, title to, and interest in existing and future DPRs of the originator. The SPC is located in Jersey and not owned or controlled by Akbank. Akbank has executed irrevocable notice of sale agreements with selected correspondent banks, giving the security trustee control over flows from these correspondent banks.

RATING SENSITIVITIES

The most significant variables affecting the transaction's rating are Akbank's credit quality, its GCA score, and the sovereign rating (BBB-/Stable). Additionally, the 'AA' ratings of The Bank of New York Mellon (BONY) as the issuer's account bank may constrain the ratings of the DPR notes if BONY is downgraded below the then ratings of the DPR notes with no remedial action taken.

Although coverage levels are also a key input, DSCRs have been high, and therefore the transaction is expected to be able to withstand a significant decline in cash flows without it affecting the ratings. Nevertheless, Fitch will analyse any changes to these variables to assess the impact on the transaction's ratings.

A new issue report outlining Fitch's analysis of ARTS 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.

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.