A guide to Turkey's most frequently used securitisation

IFR Turkey 2009
2 min read
Emerging Markets

A Diversified Payment Right is the right of an onshore bank to receive payments from an offshore bank because a payment order has been initiated by a person, company or institution situated offshore in favour of a person or entity situated onshore. For example, the payment order could be initiated by overseas workers sending money back to their families in the local jurisdiction, or it could be payment by an importer situated offshore for goods or services provided by an exporting company in a local jurisdiction. Payment orders can either take the form of paper payment orders or electronic payment orders.

Unlike traditional asset-backed securitisations, where cashflows generated from receivables of existing assets are used to repay the issued notes, DPR deals rely on the generation of future receivables arising from future payment orders. In assigning a rating to a DPR deal, Moody’s said it considers the local currency rating of the bank raising the financing but examines a number of other factors, such as: whether the DPR business of the originating bank is viable; the level and volatility of DPR flows that have been observed and expected for the life of the deal; and whether the transaction sufficiently mitigates the risk of sovereign interference. Traditionally, DPR deals have been structured to let issuing banks achieve ratings above the foreign currency bond ceilings of their own country.

DPR securitisations generally come in one of two forms, in either a true sale structure or a secured loan structure. The former typically involves the bank looking to raise money by assigning all existing and future DPR to a newly formed special purpose vehicle, which then acts as issuer. A secured loan structure is typically used in countries such as Russia that does not provide for the sale of future receivables arising from future assets. Here instead the SPV issues notes and the proceeds from those notes go towards a loan to the originating bank, which pledges the DPR rights to the SPV.

As well as Turkey, DPR deals have also been done in Brazil, Guatemala, Peru, Jamaica, Russian and Kazakhstan.