Fitch Downgrades Alliance DPR's 2006-B & 2007-A Notes; Affirms 2006-A Note
Fitch Ratings-London/Moscow-24 February 2009: Fitch Ratings has today downgraded the 2006-B and 2007-A notes issued by Alliance DPR Company SA (Alliance), while maintaining them on Rating Watch Negative (RWN), and affirmed the rating of the 2006-A notes with a Stable Outlook. The rating actions are as follows: Series 2006-A USD100m notes affirmed at 'AAA'; Outlook Stable Series 2006-B USD67.9m notes downgraded to 'BB' from 'BBB-' (BBB minus); RWN Series 2007-A USD75m notes downgraded to 'BB' from 'BBB-' (BBB minus); RWN The transaction is a securitisation of present and future diversified payment rights originated by Alliance Bank JSC ('B'/RWN), a private commercial bank headquartered in Almaty, Kazakhstan. Fitch's decision to downgrade the 2006-B and 2007-A notes follows the change in the going concern assessment of Alliance Bank JSC to which the transaction has ultimate recourse. The agency downgraded the bank's Long-term Issuer Default Rating (IDR) to 'B'/RWN from 'BB-' (BB minus) with a Negative Outlook on 19 February 2009. The agency maintained the 2006-B and 2007-A notes on RWN due to concerns over the decline in collections since February 2008, which have resulted in a drop in Alliance's monthly and quarterly debt service coverage ratios (DSCR). The transaction's DSCR declined to 9x in November 2008 from 76x in February 2008. Monthly DSCR then increased in December 2008 to 17.8x as a result of the impact of high volumes of year-end contract payments, before dropping again in January 2009 to 11.9x. Although Fitch believes that current collection flows should remain sufficient to repay the outstanding notes under their original terms, in the event of a fall in the monthly or quarterly DSCR beneath the transaction's early amortisation triggers of 7x and 9x respectively, there is a possibility that collections could fall to lower-than-anticipated levels in coming months. The fall in the quarterly DSCR below 15x in November 2008 triggered Alliance Bank to fund a coverage reserve account (CRA) to 20% of the current outstanding notes' value. This amount, equal to USD49.2m, is immediately available to pay back some of the outstanding notes in the event of an early amortisation of the transaction, and will remain in the CRA for as long as the quarterly DSCR remains below 15x. The Series 2006-A notes benefit from a guarantee and reimbursement agreement, under the terms of which the Asian Development Bank ('AAA'/Stable) guarantees the full payment of interest and principal.