OREANDA-NEWS. Fitch Ratings has assigned A.R.T.S. Ltd.'s (ARTS) Tranche 40, Tranche 41 and Tranche 42 final 'A-' ratings with Stable Outlook. The ratings address the likelihood of timely payment of interest and principal.

Fitch has also affirmed the outstanding Tranche 24, 28, 29, 30, 33, 34, 35, 36, 37 and 39 at 'A-' with Stable Outlook, following the issue of new debt. The agency does not rate the other outstanding tranches (Tranche 25, 26, 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 USD83.9bn as of end-March 2015, representing about 10.6% of total deposits and 10% 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 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 and 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. 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.

High Proportion of Domestic Flows
Domestic flows, remittances initiated by payers in Turkey, make up about 40% of the total flows. Fitch views these domestic flows as susceptible to sovereign interference and hence the agency excludes these from its DSCR analysis. However, the adjusted DSCR definition of the programme gives some credit to domestic flows.

High Coverage Levels
Fitch expects the DSCR of the programme's monthly adjusted collections to be 100x, based on offshore flows processed through SCBs as of end-June 2015. This is well above the related early amortisation triggers and in the mid-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.

Moderate Programme Size
As some tranches have further amortised in June and the total amount of new tranches is small relative to the programme size, there is no material change in the overall programme size. Fitch estimates the programme represents about 2.4% of Akbank's total liabilities and 5.3% of total liabilities, excluding customer deposits, and deems current leverage reasonable.

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 DPR of the originator. The SPC is located in Jersey and not owned or controlled by Akbank. Selected correspondent banks have executed irrevocable acknowledgement agreements, 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 Corporation (BONY) as the issuer's account bank may constrain the ratings of DPR notes if BONY is downgraded below the then ratings of 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.