Turkiye Is Bankasi (Isbank) has become the first Turkish bank to garner an underlying investment-grade rating from Standard & Poor's in the public market (see ASR 10/25/04). Led by Standard Chartered, the $500 million transaction is wrapped 50/50 by MBIA and Ambac. S&P gave the deal an underlying rating of BBB-'. The MBIA tranche has a seven-year final maturity and average life of 5.125 years. The Ambac slice has an eight-year final and 5.625-year average.

Due to price Nov. 18, price guidance is 30 to 35 basis points over three-month Libor for the MBIA chunk and 31 to 36 basis points over for the Ambac piece.

Moody's Investors Service gave the transaction a shadow rating of Baa3'. An unwrapped tranche, said to be $100 million, is reportedly going to a single investor, according to a market source.

Diversified payment rights (DPRs) - basically referring to electronic money flows - back the transaction. Isbank processed $12.8 billion of DPR flows in 2003, an increase of 77% over 2000. The expected debt-service coverage ratio for issuance of $500 million is 51 times.

While the transaction is denominated in dollars, not all DPR money is denominated in greenbacks. In 2003, 48.6% of non-Turkish collections were denominated in euros, 46.1% in dollars and 11.9% in British pounds. The leading DPR category, non-Turkish flows, are fueled primarily by payments sent by foreign entities into Turkey, including money for trade, investments or remittances to family members. Turkish flows are linked to payments between Turkish banks that take place offshore.

Turkey's Finansbank is also coming to market with a DPR transaction led by Standard Chartered. The five-year $200 million deal has a price guidance set in the 230 to 245 basis point range over three-month Libor. Moody's rates the structure Baa3' (see ASR 10/25/04).

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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