Turkiye Garanti Bankasi issued paper backed by diversified payment rights last week, breaking a silence that Turkish banks have maintained since last November. Wrapped by MBIA, the $300 million, eight-year transaction priced at 24 basis points over three-month Libor. Dresdner Kleinwort Wasserstein led the transaction, which has a 5.51-year average life and three-year interest-only period. The settlement date is May 20. Moody's Investor's Service and Standard & Poor's have rated it Triple-A.

The underlying rating from S&P is BBB-', while the agency's rating on Garanti Bank is BB-'. The deal is a securitization of all current and future diversified payment rights in the form of U.S. dollar-, euro-, and sterling-denominated payment orders. In its report on the deal, S&P noted that "total flows (excluding those generated by Garanti's offshore branches and within Turkey) in U.S. dollars, euros, and British pound sterling [increased] to US$13.6 billion in 2004 from $10.8 billion in 2003." The agency also pointed out a number of structural features that shield the deal from sovereign interference. The Republic of Turkey has a foreign-currency rating from S&P of BB-'.

Garanti is one of the leading private banks in Turkey, with total consolidated assets of roughly $22.4 billion at Dec. 31, 2004. The bank serves about five million customers through a domestic network of 393 branches as of May 9 2005.

The last Turkish DPR-backed deal to hit the market was a five-year $350 million unwrapped transaction for Finansbank. That priced at 235 basis points over Libor and came only days after a $600 million, three-tranche deal for Turkiye Is Bankasi (Isbank). Standard Chartered led both deals. Towards the end of last year, bankers had said that, flush with cash, Turkish banks were unlikely to tap DPRs in meaningful volumes for the first few months of 2005. That's turned out to be the case.

Akbank on the horizon

However, one source familiar with the sector said that others will soon follow Garanti's lead. Akbank is understood to be keen on issuing soon. Fitch Ratings has the bank's foreign currency rating at BB-', while Moody's rates its foreign currency bank deposits at B2'. Akbank is Turkey's second largest private commercial bank with a 12% share of the industry's assets as of the end of 2003, according to a Fitch report. Moody's estimates the bank's total assets at that time reached $21 billion.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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