OREANDA-NEWS. March 12, 2015. Fitch Ratings has assigned Yapi Kredi Diversified Payment Rights Finance Company's (Yapi Kredi DPR) Series 2015-A, -B and -C notes a final rating of 'A-', with a Stable Outlook. Fitch has also affirmed the outstanding A, B, C, D, and E notes of Series 2011 and 2013 and the Series 2014-A notes at ' A-' with a Stable Outlook, following the issuance of the new series.

Yapi Kredi DPR is a future flow transaction of current and future diversified payment rights (DPRs) originated by Yapi ve Kredi Bankasi A.S. (YKB; BBB/Negative/F3) and denominated in USD, EUR, and GBP. 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. The DPRs settled by YKB mainly derive from exports made by Turkish companies and are mostly denominated in USD and EUR.

Yapi Kredi DPR has been in existence since 2003.

KEY RATING DRIVERS
GCA Score Supports Rating
Fitch has a Going Concern Assessment (GCA) score of GC1 on YKB, based on its position as the fourth-largest privately owned bank in the financial system and its role in the Turkish economy. YKB had unconsolidated assets of USD74bn at end-September 2014, representing 9% of total assets of banks in the financial system, according to the Banks Association of Turkey.

Two-Notch Uplift
The GC1 enables Fitch to apply up to a three-notch uplift on DPR's notes' ratings from the local currency (LC) IDR of an investment-grade originator. As YKB's LC IDR benefits from an uplift of one notch due to parental support, Fitch has limited Yapi Kredi DPR's rating uplift to two notches. Yapi Kredi DPR's notes' ratings remain three notches above the bank's Viability Rating.

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 mitigated 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 mitigated on several levels such as acknowledgement agreements signed by specified correspondent banks.

Adequate Coverage Levels
Fitch expects monthly debt service coverage ratios (DSCRs) for the programme to be around 60x after the new notes' issuance. Fitch's analysis only considers flows through designated depositary banks and excludes domestic Turkish flows. The flows are strong and the DSCRs are more than adequately above all key trigger levels in the transaction documents. The agency tested the sustainability of coverage under various scenarios, including FX- and interest-rate stresses and a reduction in remittances at any time.

Concentration on Large Beneficiaries
Fitch notes that the level of concentration on large beneficiaries, many of them part of the Koc Group, has increased since 2011. Each month the top 20 beneficiaries represent on average 70% of total applicable collections based on figures for the past four quarters. However, the top 20 beneficiaries are not necessarily the same entities from one month to another.

Reasonable Programme Size
Fitch estimates the new series, in combination with the existing tranches, represent 2.3% of YKB's total liabilities and, excluding customer deposits, 5.7% of total liabilities. This leverage is in line with the ratios seen in other comparable DPR programmes.

True Sale and Acknowledgements
Under the true sale agreement between YKB (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 acknowledgement agreements, giving the trustee control over flows from such correspondent banks.

RATING SENSITIVITIES
The most significant variables affecting the transaction's rating are YKB's credit quality, its GCA score, and the sovereign rating. Although coverage levels are also a key input, the 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 change in these variables to assess the possible impact on the transaction's ratings.

A new issue report outlining Fitch's analysis of Yapi Kredi DPR is available at www.fitchratings.com or by clicking the link above.