CHICAGO--(BUSINESS WIRE)--Fitch Ratings has assigned the following ratings to the new issuance of notes under Industrial DPR Funding Ltd.'s existing program:
--$20 million series 2013-1 due 2018 'BBB';
--$30 million series 2013-2 due 2023 'BBB':
--$250 million series 2013-3 due 2025 'BBB'.
The Rating Outlook is Stable.
The underlying issuance is a securitization of existing and future U.S. dollar-denominated diversified payment rights (DPR) originated by Banco Industrial S.A. (BI; rated 'BB'/Outlook Stable by Fitch). The collateral includes MT 100 series payment orders and check remittances intended for third-party beneficiaries via BI. DPRs arise from transactions related to exports, capital flows and family remittances.
Fitch's rating addresses the likelihood of timely payment of principal and interest on a quarterly basis. The key rating drivers described below allow the transaction to benefit from a three-notch uplift from BI's Issuer Default Rating (IDR) of 'BB'.
KEY RATING DRIVERS
The assigned ratings reflect (i) BI's credit quality and strategic importance to Guatemala including Fitch's going concern assessment (GCA) score of 'GC1'; (ii) the strength and diversity of the bank's DPR flows; (iii) the relatively high expected quarterly debt service coverage ratio (DSCR); (iv) the moderate level of future flow debt relative to BI's total liabilities, (v) the stable sovereign environment in Guatemala, and (vi) the transaction structure, which adequately mitigates potential sovereign and/or seller flow redirection risks.
Fitch rates BI's local currency (LC) IDR 'BB', Outlook Stable based on the bank's strong national franchise, sound asset quality, good efficiency, ample deposit base and sound liquidity. The rating is constrained by BI's modest capitalization, moderate profitability and relatively high portfolio concentrations. Fitch also assigns a GCA score of GC1 to BI based on its position as the largest and most important bank in the Guatemalan financial system. A GC1 reflects the almost certain or very likely ability of the bank to continue operating even under financial difficulties.
DPR flows through BI largely mirror Guatemala's foreign currency inflows, which suffered in the wake of the global financial crisis but returned to steady growth in 2010. Total DPR flows through BI grew to $8.4 billion in 2012 from $7.5 billion in 2011, a 12% compound annual growth rate.
The transaction structure benefits from acknowledgment agreements signed with various designated payment banks (DPBs) which irrevocably instruct the DPBs to deposit DPR flows into offshore accounts controlled by the Bank of New York Mellon (LT IDR of 'AA-'; Outlook Stable), as trustee to the transaction. Since 2012, almost 90% of DPRs through BI were processed by DPBs.
The expected minimum quarterly DSCR, which considers average DPB flows during the last three years and the maximum quarterly debt service during the life of the program, is 58.0x. As of today, the outstanding balance of the program is $574 million, equivalent to 8.5% of BI's total liabilities.
Fitch rates Guatemala's foreign currency (FC) and LC IDRs 'BB+', Outlook Negative. Despite a track record of macroeconomic stability buttressed by a culture of conservative policy-making, the country's structural shortcomings are likely to cap Guatemala's rating to the 'BB' category in the medium term.
The transaction is sensitive to changes in the credit quality of BI or its GCA score, the performance of the DPR business line, a significant increase in the size of the DPR program as a percentage of the bank's total liabilities, and changes in the sovereign environment.
Although coverage levels are also a key input, the transaction should be able to withstand a significant decline in cash flows without affecting the ratings, given the relatively high expected DSCR. Nevertheless, a change in any of these variables will be analyzed in a rating committee to assess the possible impact on the transaction's rating.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Future Flow Securitization Rating Criteria' (June 18, 2013);
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Banco Industrial, S.A.' (Oct. 30, 2012);
--'DPR Securitizations from Lima to Istanbul' (Feb. 6, 2013).
Applicable Criteria and Related Research:
DPR Securitizations from Lima to Istanbul (A Comparative Perspective)
Banco Industrial S.A.
Global Structured Finance Rating Criteria