DCR Gives Garanti Triple-B Rating


U.S. investors can watch for more future-flow bonds hitting the global ABS market in the near future, sources say, following last week's triple-B rating by Duff & Phelps Credit Rating Co. of Turkey's $200 million, three-year rights-backed securitization for Turkiye Garanti Bankasij.

"We think the credibility that the rating agencies bring to the transaction is very high," said Greg Johnson, managing director and head of Yankee capital markets group at Banc of America Securities, lead manager of the Garanti deal.

"It's something that has potential in top financial institutions," said Suzanne Albers, structured analyst for Duff & Phelps. "All emerging markets, including Latin America, could find this attractive."

Fitch IBCA Inc. has also stamped a triple-B on the Garanti deal.

The uniquely structured bond, which was employed to more efficiently secure export-rights payments, bypasses troubled areas for emerging markets, such as receivable generation risk, and sovereign re-direction risk, in which governments would be able to impose transfer and convertibility restrictions.

The dollar-denominated transaction was said to attract more U.S. investors than European buyers.

"This is basically capturing the dollars offshore," Albers explained. "These dollars that pay investors never enter Turkey, until after investors have been paid."

Regardless of the structure, investors demand a larger safety net for deals issued through emerging market institutions, Albers said. "You have your receivables covering whatever is due by a multiple of 10 times," said Albers. "If overall export in Turkey were to decline, there would be a cushion for volatility."

"The investor acceptance of this structure as a high quality transaction is reflected in the fact that Garanti, who already has a fair amount of paper outstanding, was able to execute at $200 million in a difficult market," said Johnson.

Of the 120 or so future-flow ratings by Duff & Phelps, all have been deals under stressful scenarios, yet none have failed to return principle and interest to the investor, according to Johnson.