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Fitch Rates Turkiye Finans's Sukuk 'BBB-(EXP)'.

London: Fitch Ratings has assigned Turkiye Finans Katilim Bankasi A.S.'s (Turkiye Finans) proposed US dollar-denominated sukuk certificates, to be issued by TF Varlik Kiralama A.S. (TFVK), an expected 'BBB-(EXP)' rating. The expected rating is in line with Turkiye Finans's Long-Term Foreign Currency Issuer Default Rating (IDR) of 'BBB-'.

The assignment of the final rating is contingent upon receipt of final documents conforming to information already received by Fitch.

TFVK is the issuer and certificate holders' agent in respect of the sukuk. TFVK is incorporated in accordance with the laws of, and formed and registered in, Turkey as an asset leasing company. TFVK's ongoing activities will principally be the issue of lease certificates (including the sukuk certificates). TFVK is wholly owned by Turkiye Finans.


The certificate's rating is driven solely by Turkiye Finans's IDR of 'BBB-'. This reflects Fitch's view that default on these unsecured unsubordinated obligations would reflect the default of Turkiye Finans in accordance with Fitch's rating definitions.

Fitch has not considered any underlying assets or collateral provided, as we believe that the issuer's ability to satisfy payments due on the certificates will ultimately depend on Turkiye Finans satisfying its unsecured payment obligations to the issuer under the transaction documents described in the prospectus and other supplementary documents.

In Fitch's view, Turkiye Finans would also be required to ensure full and timely repayment of TFVK's obligations due to Turkiye Finans's various roles and obligations under the sukuk structure and documentation, especially - but not limited to - the features explained below:

- Pursuant to the servicing agency agreement Turkiye Finans as a servicing agent will credit all profit revenues to the profit collection account and will, on the business day prior to each periodic distribution date apply amounts standing to the credit of the profit collection account to pay the periodic distribution amounts payable by the issuer under the certificates and such amounts shall be paid to the transaction account and shall be applied by the issuer for that purpose.

- On the scheduled dissolution date the issuer will have the right under the purchase undertaking to require Turkiye Finans, following the service of a purchase undertaking exercise notice by or on behalf of the issuer, to pay to the issuer the dissolution event exercise price.

- On the business day prior to the scheduled dissolution date: (i) Turkiye Finans (as commodity purchaser) shall pay the outstanding deferred payment price to the issuer in accordance with the terms of the murabaha agreement; and (ii) Turkiye Finans (as servicing agent) shall pay the investment liquidation amount and the amounts standing to the credit of the principal collection account at that time to the issuer in accordance with the terms of the servicing agency agreement.

- Dissolution distribution amount equals: i) the outstanding face amount of the certificates as of such date ii) any accrued but unpaid periodic distribution amounts as of such date.

- Additionally, Turkiye Finans will be required to pay any shortfall in insurance proceeds on the occurrence of the total loss event.

- The payment obligations of Turkiye Finans under the transaction documents will constitute direct, unconditional, unsecured and unsubordinated obligations of Turkiye Finans and shall rank at least pari passu with all other unsecured and unsubordinated obligations of Turkiye Finans.

The documentation includes a negative pledge provision that is binding on Turkiye Finans, as well as financial reporting obligations, covenants, and Turkiye Finans event, cross default and change of control clauses.

Certain aspects of the transaction will be governed by English law while others will be governed by Turkish law. Fitch does not express an opinion on whether the relevant transaction documents are enforceable under any applicable law. However, Fitch's rating on the certificates reflects the agency's belief that Turkiye Finans would stand behind its obligations under the issue while it is servicing its other senior unsecured obligations.

When assigning ratings to the certificates to be issued, Fitch does not express an opinion on the certificates' compliance with sharia principles.


The rating is sensitive to changes in Turkiye Finans's Long-Term IDR. The ratings may also be sensitive to any changes to the roles and obligations of Turkiye Finans under the sukuk's structure and documents.
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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Jun 28, 2018
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