Turkey’s Garanti Bank has privately issued a 2014-A series off its diversified payment rights (DPRs) program, according to a source close to the transaction. 

Moody's Investors Service said in a report the size of the deal was $550 million. 

The source said this would bring the program to $3.4 billion. Garanti’s last DPR deal, 2013-E, was for $1.1 billion and came out in December.

DPRs are linked to electronic money flows from abroad. They are rights to payment orders in dollars, euros or pounds, in which the ultimate beneficiary is a firm or person holding an account at a bank.

Export payments account for a majority of Garanti’s flows with remittances from Turkish workers abroad and inward foreign investment also contributing. DPR volumes have increased significantly for Garanti since the turn of the century (see graph below article).

As with 2013-E, 2014-A was self-arranged by Garanti and placed privately. Fitch Ratings gave both deals a ‘A’ rating. While Moody’s and Standard & Poor’s did not rate the current deal, they do rate outstanding transactions off the same program. Those ratings remain ‘Baa2’ and ‘BBB+’, according to the source close to the transaction.  

Fitch said in a report on the 2013-E deal that Garanti’s DPR program reached at that point a negligible 3.3% of the bank's total liabilities and 8.3% of its liabilities excluding customer deposits.  

From Fitch’s perspective, “the most significant variables affecting the rating of the transaction are the credit quality of the bank, its GCA [Going Concern Assessment] score, and the sovereign rating.” Sovereign risk covers such potentially harmful events such as transfer and convertibility, devaluations, and nationalization and expropriation.

Fitch rates the originator ‘BBB’ and Turkey ‘BBB-.’

The source said that recent political conflict in Turkey has not made an impact on Garanti’s DPR program. Fitch said some degree of political instability is already folded into Turkey’s rating.

“Political risk has risen following the outbreak of anti-government protests in May and development in neighboring Syria and further uncertainty can be expected to accompany local and presidential elections in 2014-15,” Fitch said in its December report on the 2013-E series. “Still, Fitch notes that relatively low scores on political stability and voice accountability are already factored into Turkey’s sovereign ratings, while parallels with the Arab Spring should not be overplayed.”

Economically the country has been facing challenges with the devaluation of the lira. While up in the past couple of months it is down 16% from a year, according to the New York Times. But as exports should benefit from a weaker lira, DPR flows might actually benefit.

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