Fitch Ratings has upgraded the issue-specific rating assigned to the outstanding series 2017-2 notes issued by DPR-CR Limited to 'BBB' from 'BB+'.

The Rating Outlook on the notes remains Stable.

The rating action on the DPR transaction follows Fitch's recent upgrade of Banco Davivienda (Costa Rica), S.A. (Davivienda CR) Long-Term (LT) Local-Currency (LC) Issuer Default Rating (IDR) to 'BB+' from 'BB-' (see 'Fitch Takes Actions on Seven FIs Following Costa Rican Sovereign Upgrade' dated March 9, 2023, available at www.fitchratings.com), which in turn followed a similar rating action on Costa Rica's sovereign ratings; upgraded to 'BB-' from 'B'. The 'BBB' rating on the outstanding series translates to a two-notch uplift from the LT LC IDR of the originator.

RATING ACTIONS

Entity / Debt

Rating

Prior

DPR-CR Limited

2017-2 G2616*AB1

LT

BBB

Upgrade

BB+

Page

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VIEW ADDITIONAL RATING DETAILS

Transaction Summary

The future flow program is backed by U.S. dollar-denominated existing and future diversified payment rights (DPRs) originated by Banco Davivienda (Costa Rica), S.A. (Davivienda CR). The majority of DPRs are processed by designated depository banks (DDBs) that have executed acknowledgement agreements (AAs), irrevocably obligating them to make payments to an account controlled by the transaction trustee. Fitch's ratings address timely payment of interest and principal on a quarterly basis.

KEY RATING DRIVERS

Originator's Credit Quality Drives DPR Rating: The rating of this future flow transaction is tied to the credit quality of the originator, Banco Davivienda (Costa Rica), S.A. (Davivienda CR). On March 9, 2023, Fitch upgraded Davivienda CR's LT LC IDR to 'BB+' from 'BB-' with a Stable Outlook. The bank's viability rating (VR) was also upgraded to 'bb-' from 'b'. This rating action follows Fitch's revision of its assessment for the Costa Rican banking system's operating environment (OE) to 'bb-' from 'b' with a stable trend. Davivienda CR's IDRs reflect the potential support that it would receive from its parent Banco Davivienda, S.A. (Davivienda; BB+/Stable).

Strong Going Concern Assessment (GCA): Fitch uses a GCA score to gauge the likelihood that the originator of a future flow transaction will stay in operation throughout the transaction's life. Fitch assigns a GCA score of 'GC2' to Davivienda CR, based on the bank's strategic importance to its parent, as well as its moderate importance within the Costa Rican financial system. The score allows for a maximum of four notches above the LC IDR of the originator; however, additional factors limit the maximum uplift.

Several Factors Limit Notching Differential: The 'GC2' score allows for a maximum uplift of four notches from the originator's IDR pursuant to Fitch's future flow methodology. However, the uplift is tempered to two to three notches as the maximum rating uplifts only apply to transactions where the originating bank is rated at the lower end of the rating scale and further tempered, in this instance, to two notches as Davivienda CR's IDR is support-driven. The rating on the notes is currently four notches from the bank's viability rating of 'bb-'.

Moderate Program Size: The future flow transaction represents approximately 1.3% of Davivienda CR's total funding and 3.6% of non-deposit funding when considering the current outstanding balance on the program ($44 million) as of Jan. 31, 2023 and utilizing December 2022 financials. While Fitch considers these ratios small enough to differentiate the credit quality of the financial future flow transaction from the originator's LC IDR, an increase in future flow debt size could constrain the transaction ratings.

Coverage Levels Commensurate With Rating: When considering average rolling quarterly DDB flows over the past five years (February 2018-January 2023) and the maximum periodic debt service over the remaining life of the program, Fitch's projected quarterly debt service coverage ratio (DSCR) is 121.2x. Moreover, the transaction can withstand a reduction in flows of approximately 99% and still cover the maximum quarterly debt service obligation. Nevertheless, Fitch will continue to monitor the performance of the flows as potential economic pressures could negatively impact the assigned rating.

Sovereign/Diversion Risks Reduced: The structure mitigates certain sovereign risks by keeping cash flows offshore until scheduled debt service is paid to investors, allowing the transaction to be rated above Costa Rica's Country Ceiling. Fitch believes payment diversion risk is partially mitigated by the AAs signed by the five correspondent banks processing the vast majority of DPR flows.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

The transaction ratings are sensitive to changes in the credit quality of the originating bank. A deterioration of the credit quality of the sovereign and/or originating bank is likely to pose a constraint to the rating of the transaction from its current level;

The transaction ratings are sensitive to the ability of the DPR business line to continue operating, as reflected by the GCA score. Additionally, the transaction rating is sensitive to the performance of the securitized business line. The quarterly DSCRs are expected to be sufficient to cover debt service obligations and should therefore be able to withstand a significant decline in cash flows in the absence of other issues. However, significant further declines in flows or an increase in the level of future flow debt as a percentage of the bank's liabilities could lead to a negative rating action. Any changes in these variables will be analyzed in a rating committee to assess the possible impact on the transaction ratings;

No company is immune to the economic and political conditions of its home country. Political risks and the potential for sovereign interference may increase as a sovereign's rating is downgraded. However, the underlying structure and transaction enhancements mitigate these risks to a level consistent with the assigned rating.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

The main constraint to the notes' rating is the originator's rating and the bank's OE. If upgraded, Fitch will consider whether the same uplift could be maintained or if it should be further tempered in accordance with criteria.

Best/Worst Case Rating Scenario

International scale credit ratings of Structured Finance transactions have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of seven notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of seven notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAAsf' to 'Dsf'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

USE OF THIRD PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G -10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS

The future flow ratings are driven by the credit risk of Davivienda CR as measured by its LT LC IDR.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.

Additional information is available on www.fitchratings.com

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