Rising interest rates and the eruption of war in Lebanon and Israel has persuaded many players in Turkish structured finance that it would be better to hold off on making deals until September, sources said. HSBC Turkey, however, might prove an exception, while Yapi ve Kredi Bankasi is heard to be querying players on a potential deal.

HSBC Turkey is heard readying a debut deal backed by diversified payment rights (DPRs). Lead by HSBC itself, the deal will likely end up with a wrap from FGIC, which, so far this year, has insured a $150 million, seven-year tranche in a DPR transaction originated by Turkiye Vakiflar Bankasi, according to a source familiar with the sector. More details on HSBC Turkey's transaction were unavailable at press time.

FGIC wrapped another DPR deal from an HSBC unit based in an emerging market earlier this year. HSBC Bank Brasil - Banco Multiplo placed a 10-year $200 million bond in late February, via HSBC. That deal marked only the second time a global bank in Brazil has securitized DPRs.

Similarly, in Turkey, DPR transactions are predominantly the terrain of local banks seeking funding terms they couldn't achieve in unsecured transactions.

Operating in Turkey since 1990, HSBC bulked up with its purchase of Demirbank, the fifth largest private bank in the country, in October 2001. Now HSBC Turkey runs a network of 157 branches and offers a wide gamut of products and services.

Elsewhere, sources said Yapi Kredi has been talking to players about a potential DPR transaction for post-summer. At press time it was unclear whether this would include flows from Kocbank, which is in the process of purchasing Yapi Kredi, a process slated for completion in October. A Yapi Kredi official didn't reply to e-mail questions as of press time.

Yapi Kredi bank has tapped the asset before in a bridge loan arranged by Standard Chartered in December 2003, according to a source close to the deal. But the bank appears to be a fresh face for the public securitization market. Kocbank, meanwhile, has yet to tap DPRs, according to a veteran industry source.

The Kocbank-Yapi Kredi pairing will give rise to one of the top three banks in Turkey. Last year, Kocbank, owned by Koc Holding and UniCredit, agreed to purchase a majority stake in Yapi Kredi from the Cukurova Group. Kocbank initially laid out $1.4 million for a 57.4% stake, but snapped up additional shares in the market to boost its holding to 67.3%. Based on figures up to April 30, the banks' assets will total YTL40.6 billion ($27.2 billion), roughly 10% of the Turkish banking sector. The merger is expected to be complete in October.

Moody's Investors Service rates the foreign currency bank deposits of both banks B1'. The financial strength ratings differ, however, with Kocbank earning a D' and Yapi Kredi holding an E+'. While the merger exerts downward pressure on Kocbank's credit standing, it has had the opposite effect on Yap Kredi's, according to a Moody's report.

(c) 2006 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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