Fitch Assigns Bosphorus Financial Services Limited's Series 2015-A, -B, -C and -D Final Ratings
Fitch has also affirmed the outstanding Series 2012-B, -C and -D notes at 'BBB+' with Stable Outlooks, following the issuance of the new series.
Bosphorus Financial Services Limited is a securitisation of diversified payment rights (DPR) originated by Finansbank 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. Bosphorus Financial Services Limited has purchased all present and future DPRs denominated in dollars, euros and pounds from Finansbank, financed through issued notes that are secured on the DPRs.
KEY RATING DRIVERS
GCA Score Supports Rating
Fitch has a Going Concern Assessment (GCA) score of GC3 for Finansbank, based on its position as the fifth-largest privately owned bank in the financial system and its role in the local economy. The bank had unconsolidated assets of USD30.7bn as of June 2015, representing 3.8% of total deposits and 4.0% of total system assets, according to the Banks Association of Turkey.
Two-Notch Uplift
The GC3 score enables Fitch to apply a maximum two-notch uplift on Bosphorus DPR ratings over the bank's local currency Issuer Default Rating (IDR) of 'BBB-'. The ratings are driven by the bank's standalone creditworthiness, as reflected by its 'bbb-' Viability Ratings (VR) and the notching uplift is supported by the stability, strength and diversification of the flows, size of the future flow debt relative to the bank's overall liabilities and reasonable collateral coverage.
Low Parent Contagion
Finansbank's VR reflects Fitch's view of low contagion risk from its parent, National Bank of Greece, which was downgraded to 'RD' following the imposition of capital controls on Greek banks (see 'Fitch Downgrades Greek Banks to 'RD' on Capital Controls', dated 29 June 2015 at www.fitchratings.com). Asset exposures to Greece are negligible and parent funding is limited. Also, Finansbank continues to maintain substantial liquidity buffers and have relatively high capital ratios.
Reasonable Cash Flow Coverage
Fitch expects the monthly debt service coverage ratios (DSCRs) for the programme to reduce to 35x. This is based on offshore flows transferred through designated depository banks (DDBs) as of July 2015 as the agency is of the opinion that onshore flows are susceptible to sovereign interference. The coverage remains above the related early amortisation triggers but falls below that for peer DPR programmes.
The agency tested the sustainability of coverage under various scenarios, including FX- and interest-rate stresses and a reduction in remittances that considers certain flow concentration parameters. Even in stressed scenarios, the flows remain healthy and the DSCRs are adequately above the trigger levels set out in the transaction documents.
High Proportion of Domestic Flows
Flows arising when the payor bank is either inside of Turkey or a non-Turkish branch with its main office in Turkey (also known as Turkish flows) dominate the applicable collections, making up more than 70% of the total. These flows continue to be available to the SPC in the base scenario. However, in Fitch's opinion, they are susceptible to sovereign interference. To mitigate any concentration of these flows, the transaction's "tested collections DSCRs" limit them to no more than 17.6% of the offshore flows.
Sovereign Risk Reduced
When contemplating ratings above a country's Long-term IDR, Fitch considers potential sovereign risk events consistent with the rating. These may 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 DPRs are captured in an offshore account. The payment-diversion risk is further mitigated by acknowledgement agreements signed by high-flow generating, offshore correspondent banks.
Very Small Programme Size
Fitch estimates that Finansbank's DPR programme represents about 1.5% of total liabilities and 3.6% of total liabilities excluding deposits. This is lower than the ratio for comparable DPR programmes from other originators and contributes to the strengths of Bosphorus.
True Sale and Acknowledgements
Under the true sale agreement between Finansbank (the seller) and the issuer, the seller has sold to the SPC 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 ratings are Finansbank'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 the DPR notes if BONY is downgraded below the then ratings of the DPR notes and no remedial action is taken.
Although coverage levels are also a key input, DSCRs have been high, and therefore we expect the transaction 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 Finansbank DPR 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 not requested any third party assessment of the information about DPR flows or conducted a review of origination files because there is no existing asset portfolio to assess in future flow transactions.
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