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Fitch Rates Salvadoreno DPR Funding 2004-1 A&R Notes 'BBB'.

CHICAGO -- Fitch Ratings has assigned a 'BBB' rating to Salvadoreno DPR Funding Ltd's $125 million series 2004-1 A&R notes. In addition, Fitch affirms Salvadoreno DPR Funding Ltd's $25 million 2004-2 notes at 'BBB' and Issuer Default Rating (IDR) at 'BBB'.

The issuance is a securitization of existing and future U.S. dollar-denominated diversified payment rights (DPRs) originated by Banco Salvadoreno (BS) in El Salvador. The issue rating reflects the structural mitigants to several sovereign and bank risks associated with El Salvador and BS, allowing the rating of the securitization to reach 'BBB'. The rating also reflects the strength of BS's DPR flows and the legal structure of the transaction.

The timely payment of interest and principal on the series 2004-1 A&R notes will be supported by the bank's international remittance operations. The transfer of these DPRs will be structured as a 'true sale' pursuant to an origination agreement and bill of sale between the bank and the special purpose company (SPC) covering existing and future U.S. dollar-denominated DPRs originated or acquired by BS. Under an indenture, the SPC's primary assets will include all of the DPRs and the various collection accounts created for the transaction. The transaction will be supported by a true sale structure and should have cash flow coverage levels of more than 30 times (x), based on the recent volume of flows. The collateral is broadly defined to capture all dollar flows received by the bank from the United States. More than 95% of DPRs flow through three correspondent banks that have signed notice and acknowledgement agreements (N&As) irrevocably obligating them to pay remittances through the offshore accounts controlled by the indenture trustee.

Fitch currently rates BS as follows:

--Long-term IDR 'BB' (Rating Watch Positive);

--Short-term rating 'B' (Rating Watch Positive);

--National long-term rating 'AA-(slv)' (Positive Outlook);

--Individual 'D';

--Support '3' (Rating Watch Positive).

BS's ratings are based on its prominent position within El Salvador's banking system, its strong domestic franchise, adequate profitability and capital levels, and improving asset quality. BS is the third largest Salvadoran bank, with an asset market share of 17% at year-end 2005. Although the bank had been domestically held by a group of local investors, they recently sold a majority stake in IFBS, BS's holding company, to Panama's Grupo Banistmo (parent of Primer Banco del Istmo, which is rated 'BB+' by Fitch), the largest financial group in Central America in terms of assets. It is worth noting that HSBC (rated 'AA' by Fitch) has made a cash tender offer to acquire all outstanding shares of Banistmo. The transaction is expected to be completed before year-end 2006.

For a more detailed analysis of BS, please refer to Fitch's full rating report dated Nov. 22, 2005, available on the Fitch Ratings web site at

For more detailed information on this transaction, see the published presale report titled 'Salvadoreno DPR Funding Ltd. Series 2004-1 A&R' dated Sept. 14, 2006, also available at

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
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Publication:Business Wire
Date:Sep 26, 2006
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