Fitch Affirms Industrial DPR Funding Ltd. at 'BBB'; Outlook Stable

Fitch Ratings has affirmed the ratings of the following notes issued by Industrial DPR Funding Ltd.:

--$300 million series 2007-1 due 2014 at 'BBB';

--$50 million series 2011-1 due 2018 at 'BBB';

--$40 million series 2011-2 due 2018 at 'BBB';

--$60 million series 2011-3 due 2021 at 'BBB';

--$30 million series 2011-4 due 2021 at 'BBB';

--$20 million series 2013-1 due 2018 at 'BBB';

--$30 million series 2013-2 due 2023 at 'BBB';

--$250 million series 2013-3 due 2025 at 'BBB';

--$150 million series 2013-4 due 2023 at 'BBB'.

The Rating Outlook is Stable.

The underlying issuance is a securitization of existing and future U.S. dollar-denominated diversified payment rights (DPR) originated by Banco Industrial S.A. (BI; 'BB'; Outlook Stable). The collateral includes MT 100 series payment orders and check remittances intended for third-party beneficiaries via BI. DPRs arise from transactions related to exports, capital flows and family remittances.

KEY RATING DRIVERS

The rating action reflects (i) BI's credit quality and strategic importance to Guatemala; (ii) the transaction's strong performance; (iii) level of future flow debt relative to the bank's total liabilities; (iv) the transaction structure, which helps mitigate transfer and convertibility (T&C) risk; and (v) the sovereign environment.

On May 28, 2014, Fitch affirmed BI's local currency (LC) Issuer Default Rating (IDR) at 'BB'; Outlook Stable. Fitch assigns a going assessment score of 'GC1' to BI based on its position as the largest bank in the Guatemalan financial system. A 'GC1' reflects very likely ability of the bank to continue operating even under financial difficulties.

Total DPR flows through BI marginally grew to $8.5 billion in 2013 from $8.4 billion in 2012. As of June 2014, these flows have been $4.2 billion, for which Fitch believes that 2014 figures will close very similar to 2013's. Fitch's quarterly debt service coverage ratio (DSCR), which considers total DPR collections and maximum quarterly debt service, averaged 72.4x during the last 12 months.

As of June 2014, the outstanding balance of the program is $657 million, about 8.6% of BI's unconsolidated liabilities. This is small enough to allow the transaction rating up to the maximum uplift indicated by the GCA score.

On June 20, 2014, Fitch downgraded Guatemala's long-term foreign currency and LC IDRs to 'BB' from 'BB+', and the Country Ceiling (CC) to 'BB+' from 'BBB-' and revised the Rating Outlook is Stable . The transaction adequately mitigates T&C risk, as payments from obligors are collected offshore, allowing the transaction to be rated above the CC.

RATING SENSITIVITIES

The transaction is sensitive to changes in the credit quality of BI, the performance of the DPR business line, a significant increase in the size of the DPR program as a percentage of the bank's total liabilities, and changes in the sovereign environment.

Although coverage levels are also a key input, the DSCRs have been consistently high, and therefore the transaction should be able to withstand a significant decline in cash flows without affecting the ratings. Nevertheless, a change in any of these variables will be analyzed in a rating committee to assess the possible impact on the transaction's rating.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--Global Structured Finance Rating Criteria - May 20, 2014;

--Future Flow Securitization Rating Criteria - June 9, 2014;

--DPR Securitizations from Lima to Istanbul (A Comparative Perspective) - Feb. 6, 2013;

--Banco Industrial S.A. - July 2, 2014.

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Future Flow Securitization Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=749768

DPR Securitizations from Lima to Istanbul (A Comparative Perspective)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=700111

Banco Industrial

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751675

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=855574

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