Fitch: Fitch Explains the Application of Recovery Rates to Future Flow Transactions.

CHICAGO -- Fitch Ratings today assigned Issuer Default Ratings (IDRs) and Issuer Ratings (IRs) to the future flow transactions Fitch currently rates. Associated with this, Fitch also today published its methodology for assigning IDRs and IRs to future flow transactions, which sets out the applicable criteria for determining when the collateral or transaction structure would justify a differentiation between the IDR and the IR.

It is important to note that the actual ratings of Fitch's outstanding future flow transactions have not changed. Fitch will assign individual IDRs to the 24 programs currently outstanding which will be similar to the current ratings of these transactions. Furthermore, Fitch will assign 76 IRs to the individual series outstanding under these programs.

Over the course of 2005 and into 2006 Fitch has been assigning IDRs and IRs to corporate, bank, and sovereign ratings. The IDR reflects an issuer's ability to honor its obligations on a timely basis; it is thus a benchmark 'probability of default' measure of the issuing entity. The IR is an adjusted measure -- specific to a particular issue -- that includes elements of loss given default to that issue.

"Whilst in general terms Fitch has not applied recovery ratings to structured finance transactions, given the hybrid nature of future flow deals and their intrinsic tie to the originating corporate or bank, the agency's view is that explicit IDRs and IRs will elucidate the fact that there may be differences between the recoveries for different issues from the same future flow trust," according to Greg Kabance, Managing Director within Fitch's Latin America group based in Chicago. However, Mr. Kabance pointed out that in order for an issue to carry a higher IR than the future flow IDR a significant degree of structuring would need to be carried out or the transaction would need to have very unique characteristics. This was highlighted by the fact that at present the IDRs for all deals currently rated by Fitch are the same as the IR.

As explained in the report, the going concern assessment (GCA) of the originator will continue to be the first step in the analysis. This measure of performance risk will still cap the probability of default of the future flow transaction (the IDR), but the structure may justify the IR for a particular issue being higher or lower (as well as the same as) the GCA.

"Given their proven track record and mitigation of a number of key emerging markets risks, including sovereign and local legal risks, we expect future flow securitizations to continue to be a staple for emerging markets issuance for the foreseeable future," said Wasif Kazi, Director within the EEMEA Emerging Markets team in London. "The fact that our ratings would recognize a different loss given default for a particular issue should give due credit for a collateral or transaction profile which supported higher recovery expectations."

The report discusses various types of collateral and transaction structure that could justify a differentiation between the IDR and the IR, as well as the factors which would condition their efficacy in improving an IR.

A copy of the report 'Rating Future Flow Transactions and Recovery Rates' is available on the Fitch web site at www.fitchratings.com.

The following IDR and Issuer Ratings were assigned to Fitch's existing Future Flow portfolio:

DFS Funding Corp. IDR 'BBB-'

--Series 2005-A IR 'BBB-';

--Series 2005-B IR 'BBB-';

--Series 2005-C IR 'BBB-'.

Gazprom International IDR 'BBB'

--Series 1 IR 'BBB'.

Russia International Card Finance SA IDR 'B+'

--Series 1 IR 'B+'

IndoCoal Exports Limited IDR 'BBB-'

--Series 2005 -1 IR 'BBB-'.

Alcoa Aluminio S.A. IDR 'BBB'

--Series 1996-1 IR 'BBB'.

Arcel Finance Limited IDR 'BBB'

--Series 2002 IR 'AAA/BBB'(a);

--Series 2003 IR 'BBB';

--Series 2004 IR 'BBB'.

Industrial DPR Funding Ltd IDR 'BBB'

--Series 2005-1 IR 'AAA/BBB'(a);

--Series 2005-2 IR 'BBB'.

Brazilian Diversified Payment Rights Finance Co. IDR 'BBB+'

--Series 2003-3 IR 'BBB+';

--Series 2004-1 IR 'BBB+';

--Series 2005-1 IR 'AAA/BBB+'(a);

--Series 2005-2 IR 'BBB+';

--Series 2005-VF IR 'AAA/BBB+'(a).

Bancomer Receivables Master Trust IDR 'A'

--Series 1999 IR 'AAA/A'(a);

--Series 2004 IR 'AAA/A'(a).

Banistmo Credit Card Receivables Master Trust IDR 'BBB'

--Series 2001 IR 'BBB';

--Series 2004 IR 'BBB'.

CSN Export Trust IDR 'BBB-'

--Series 2003 IR BBB-';

--Series 2004 IR BBB-';

--Series 2005 IR BBB-'.

Cuscatlan Remittance Master Trust IDR 'BBB'

--Series 2002 IR 'AAA/BBB'(a);

--Series 2003 IR 'AAA/BBB'(a);

--Series 2004 IR 'BBB';

--Series 2005 IR 'AAA/BBB'(a).

CVRD Finance Ltd. IDR 'BBB'

--Series 2000-1 IR 'BBB';

--Series 2000-2 IR 'AAA';

--Series 2000-3 IR 'BBB';

--Series 2003-1 IR 'AAA'.

Brazil Steel Importer Ltd. IDR 'BBB-'

--Series 2003-A IR 'BBB-';

--Series 2004-A IR 'BBB-'.

LANChile S.A. IDR 'BBB-'

--Series 1999 IR 'A-/BBB-'(a);

--Series 2002 IR 'BBB-'.

Molinos Rio de la Plata S.A. IDR 'B'

--Series 1996 IR 'B'.

PDVSA Finance Ltd. IDR 'BB+';

--Series 1998B IR 'BB+';

--Series 1998C IR 'BB+';

--Series 1998D IR 'BB+';

--Series 1998E IR 'BB+';

--Series 1999G IR 'BB+';

--Series 1999H IR 'BB+';

--Series 1999I IR 'BB+';

--Series 1999J IR 'BB+';

--Series 2001K IR 'BB+'.

PEMEX Finance Ltd. IDR 'A-'

Series 1998

--8.02% Notes due 2007 IR 'A-';

--6.30% Notes due 2010 IR 'AAA/A-'(a);

--9.15% Notes due 2018 IR 'A-'

Series 1999

--8.45% notes due 2007 IR 'A-';

--6.55% notes due 2008 IR 'AAA/A-'(a);

--8.88% notes due 2010 IR 'A-';

--3.25%+LIBOR Notes due 2014 IR 'A-';

--9.69% notes due 2009 IR 'A-';

--7.33% notes due 2012 IR 'AAA/A-'(a);

--3.50%+LIBOR notes due 2014 IR 'A-';

--10.61% notes due 2017 IR 'A-'

Series 2000

--9.03% notes due 2011 IR 'A-'

--7.80% notes due 2013 IR 'AAA/A-'(a)

PF Export Receivables Master Trust IDR 'BBB-'

--Series 2001-A1 IR 'AAA/BBB-'(a);

--Series 2001-A2 IR 'AAA/BBB-'(a);

--Series 2001-B IR 'AAA/BBB-'(a);

Series 2001-C IR 'AAA/BBB-'(a);

--2003-A IR 'BBB-';

--2003-B IR 'AAA/BBB-'(a)

Salvadoreno DPR Funding Ltd IDR 'BBB'

--Series 2004-1 IR 'BBB';

--Series 2004-2 IR 'BBB'

Brazil Foreign Diversified Payment Rights Finance Co. IDR 'BBB+'

--Series 2004-1 IR 'BBB+'

Telefonica del Peru Grantor Trust IDR 'BBB'

--Series 1998 IR 'BBB'.

UBB Diversified Payment Rights Finance Company IDR 'BBB'

--Series 2002-1 A&R IR 'BBB';

--Series 2003-2 IR 'BBB';

--Series 2003-3 A&R IR 'BBB';

--Series 2004-1 IR 'AAA/BBB'(a);

--Series 2004-2 IR 'AAA/BBB'(a)

Brazilian Merchant Voucher Receivables Ltd. IDR 'BBB+'

--Series 2003-1 IR 'BBB+';

--Series 2003-2 IR 'BBB+'

(a) Indicates the underlying rating of the issue.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.