Fitch Rates Iktisat Bank's Payment Right-Backed Notes 'BBB-'.Business Editors NEW YORK--(BUSINESS WIRE)--June 6, 2000 Fitch-NY-June 6, 2000: Fitch, the international rating agency, has assigned a 'BBB-' rating to the Euro150 million notes issued by G-7 Payment Rights PLC. The notes are secured by existing and future payment rights receivables due to Iktisat Bankasi ('Iktisat'), a commercial bank in the Republic of Turkey. The payment rights consist of U.S. dollar, Deutschemark and euro-denominated payment rights arising under letter of credit (LOC LOC - lines of code ), cash against documents (CAD) and cash against goods (CAG CAG 1 Chronic atrophic gastritis 2 Coronary angiography, see there ) transactions and other payments generally made by Swift MT100 transfers (MT100s) or similar mechanisms. Highly rated designated correspondent banks Correspondent bank Bank that accepts deposits of, and performs services for, another bank (called a respondent bank); in most cases, the two banks are in different cities. in the U.S. and Germany have signed acknowledgements to transfer all such payment rights to accounts under the control of the loan security trustee. The 'BBB-' rating assigned by Fitch indicates timely payment of interest and ultimate payment of principal on the notes, which have an expected final maturity date of May 2005, following a two-year interest only period. The rating of the notes reflects Fitch's assessment of the following risks: -- Receivables generation risk, or Iktisat's ability to generate a sufficient amount of foreign currency receivables through its payment rights processing businesses; -- Sovereign related risks, or the degree of protection provided by the structure from potential foreign exchange and convertibility restrictions and other forms of sovereign intervention; -- Performance risk, which is Iktisat's ability to continue its business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets . Fitch's 'BB-' sovereign foreign currency rating for Turkey has been considered in the assignment of the 'BBB-' rating to the 2000 certificates. The transaction's rating is able to pierce the country ceiling due to the offshore cashflows and structure. Iktisat is one of the leading trade finance banks in Turkey As of September 2006, the size of the banking industry is 88.2% of total financial sector in Turkey. There are 51 banks as of September 2006: 3 public, 16 private, 14 foreign, 13 non-commercial, 4 participation banks. , handling over the last 15 years on average 7% of Turkey's international trade volume. The processing of payment rights is an integral part of Iktisat's corporate banking services and strategy of providing a diverse set of trade finance services to its Turkish customers. The maximum debt service coverage ratio The debt service coverage ratio (DSCR), or debt service ratio, is the ratio of net operating income to debt payments on a piece of investment real estate. It is a popular benchmark used in the measurement of an income-producing property’s ability to produce (DSCR DSCR See: Debt-service coverage ratio ), based upon 1999 flows from LC and CAD transactions, is 18 times (x), while MT100 payments, which consist of payments from CAG transactions, payments for other goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. and the potentially less stable capital inflows added additional DSCR of 4x, giving a total DSCR of 22x. The high initial DSCR is also indicative of the relatively large pipeline of existing assets that Iktisat has sold into the transaction. Based upon current cash flows and an average payment right transaction processing Updating the appropriate database records as soon as a transaction (order, payment, etc.) is entered into the computer. It may also imply that confirmations are sent at the same time. Transaction processing systems are the backbone of an organization because they update constantly. time of 45 days, there would be enough existing assets to pay 100% of the principal on the notes. The future generation of receivables will be dependent on various factors, including Iktisat's ability to maintain its competitive position and market share in the export payment processing business, the overall level of exports out of Turkey and the continued use of these export payment systems during the five-year tenor of the transaction. Fitch believes that the risk of sovereign interference in the transaction, should there be a severe foreign currency shortage, is substantially mitigated due to the following factors: -- The lack of incentive for the sovereign to interfere since a significant portion of hard currency flows (approximately 95% at closing) will already be remitted back to Turkey on a regular basis. -- The difficulty of redirecting the export payments, in particular the MT100 payments, because of the large and varied base of parties both inside and outside of Turkey that would need to be contacted to divert di·vert v. di·vert·ed, di·vert·ing, di·verts v.tr. 1. To turn aside from a course or direction: Traffic was diverted around the scene of the accident. 2. all of the flows away from the structure. Furthermore, during a period of crisis in Turkey, large money center banks Money center banks Banks that raise most of their funds from the domestic and international money markets , relying less on depositors for funds. may be unwilling to open new accounts with Turkish banks without a thorough understanding of each new relationship. -- Link to exports. By interfering with this transaction, the sovereign would also need to interfere with Iktisat's ability to offer pre-export financing for all exporters. -- The legal sale of payment rights to the SPC 1. (business) SPC - Statistical Process Control. Something to do with quality management. 2. (body) SPC - Software Productivity Centre. 3. (company) SPC - Software Publishing Corporation. 4. and the potential legal action that alternative foreign correspondent banks processing such payment rights could be subject to following notice of the previous sale. Fitch's credit assessment of Iktisat reflects its position within the Avrupa Group, its significant market share of Turkish trade finance turnover and a strategy geared towards diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. of income and funding sources through development of retail banking activities. The assessment also takes into consideration the high level of competition amongst Turkish banks in the retail market, a potentially volatile economic and operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. and high exposure to the Turkish government resulting in vulnerability to macro events. A copy of the report, for this transaction is available at www.fitchibca.com. |
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