ACRA assigns BB+(RU) to «TECHNO Leasing», L.L.C., outlook Stable

The credit rating of «TECHNO Leasing», L.L.C. (hereinafter, TECHNO Leasing, or the Company) is based on its moderate business profile, adequate capital adequacy, satisfactory risk profile, and satisfactory funding and liquidity assessment.

TECHNO Leasing is a universal leasing company that focuses on financial leasing of motor vehicles, construction machinery, and equipment for small and medium sized businesses in the Central Federal District. The ultimate beneficiary is V. Smirnov, who owns a 100% stake in the Company.

Key rating assessment factors

Moderate business profile. TECHNO Leasing has recorded considerable business growth in 2019, with the volume of the Company’s leasing portfolio increasing by one-and-a-half times in January to September. In 9M 2019, the volume of new business exceeded the indicator for the same period in 2018 by 28%. The Company ranked 72nd in terms of new business and 82nd in terms of leasing portfolio as of September 30, 2019. Passenger vehicles and trucks account for 72% of the portfolio, while road construction and construction vehicles have a 13% and 8% share, respectively. ACRA assesses the liquidity of assets transferred under leasing agreements as above average. The concentration of the customer base is average — as of September 30, 2019, the Company’s largest client accounted for around 9% of the leasing portfolio, while the 10 largest clients accounted for 49%. The quality of corporate governance and risk management is assessed as adequate.

The adequate capital adequacy assessment stems from the Company’s significant loss absorption buffer coupled with moderate capital generation capacity. The Company’s capital adequacy ratio (CAR) according to financial statements for 9M 2019 was around 30%. The average capital generation ratio (ACGR) stands at around 91 bps for the past five years.

The risk profile is satisfactory due to a moderate share of potentially problem debt (ACRA estimates it at around 10% of the leasing portfolio as of September 30, 2019) combined with actual overdue debt at less than 0.5% of the portfolio (both in the past and currently). ACRA assesses the credit quality of the largest lessees as adequate.

Satisfactory funding and liquidity assessment. The Company’s funding structure is moderately diversified. The Company raises funds from two main sources that account for an equal share: debt securities (33% of assets as of September 30, 2019) and bank loans (31%). The share of the five largest bank lenders is satisfactory at 29%. As of September 30, 2019, the Company had two outstanding bond issues totaling RUB 350 mln. The Company plans to increase the size of bond issues and credit lines provided by banks while maintaining the diversification of funding sources. In ACRA’s base case scenario, which takes into account the Company’s business development plans, TECHNO Leasing exhibits a certain reserve of cash at the end of each quarter for the next 12–24 months (the forecasted current liquidity ratio exceeds 1.0). In ACRA’s stress scenario, the need to raise emergency liquidity is insignificant. However, ACRA notes that the Company does not possess any sources of emergency liquidity.

Key assumptions

  • Maintaining the current business model within the 12–18 month horizon;
  • CAR of at least 15% within the 12–18 month horizon;
  • Share of problem and potentially problem debt under leasing agreements of lower than 15%.

Potential outlook or rating change factors

The Stable outlook assumes that the rating will most likely stay unchanged within the 12 to 18-month horizon.

A positive rating action may be prompted by:

  • Significant strengthening of market position;
  • Considerable improvement of leasing portfolio quality;
  • Higher diversification of funding sources.

A negative rating action may be prompted by:

  • Substantial drop in capital adequacy due to rapid growth in business or increased cost of risk;
  • Decreased ability to generate capital;
  • Deterioration in leasing portfolio quality;
  • Significant deterioration in liquidity position.

Rating components

Standalone creditworthiness assessment (SCA): bb+.

Adjustments: none.

Support: none.

Regulatory disclosure

The credit rating of «TECHNO Leasing», L.L.C. has been assigned under the national scale for the Russian Federation based on the Methodology for Credit Ratings Assignment to Leasing Companies Under the National Scale for the Russian Federation and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities.

A credit rating has been assigned to «TECHNO Leasing», L.L.C. for the first time. The credit rating and its outlook are expected to be revised within one year following the publication date of this press release.

The credit rating was assigned based on the data provided by «TECHNO Leasing», L.L.C., information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using statements of «TECHNO Leasing», L.L.C. composed in compliance with RAS. The credit rating is solicited, and «TECHNO Leasing», L.L.C. participated in its assignment.

No material discrepancies between the provided data and the data officially disclosed by «TECHNO Leasing», L.L.C. in its financial statements have been discovered.

ACRA provided no additional services to «TECHNO Leasing», L.L.C. No conflicts of interest were discovered in the course of credit rating assignment.

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