The credit rating of «TECHNO Leasing», L.L.C. (hereinafter, TECHNO Leasing, or the Company) has been upgraded because its risk profile assessment has increased to strong while its moderate business profile, adequate capital adequacy, and satisfactory funding and liquidity assessments have remained unchanged.

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

Key rating assessment factors

The moderate business profile. The business profile score has remained unchanged against the level of 2019, but ACRA notes that in 2020, on the back of a downturn in the economy and a restricted growth in the leasing sector, the Company recorded growth in the leasing portfolio by one-and-a-half times in January to September and amounted to RUB 1,516 mln, which nevertheless continues to be a relatively low result for the Russian market. Passenger vehicles and trucks account for 68% of the portfolio, while the share of road construction vehicles is 26%. ACRA assesses the liquidity of assets leased by the Company as above medium. The concentration of the customer base is medium: as of September 30, 2020, the Company’s largest client accounted for around 13% of the leasing portfolio, while the 10 largest clients accounted for 46%. The quality of corporate governance and risk management is still adequate.

The adequate capital adequacy assessment stems from the Company’s significant loss absorption buffer coupled with its moderate capital generation capacity. In 9M 2019, the Company’s capital adequacy ratio (CAR) declined by 8% to 18%, which qualifies for the high score. The averaged capital generation ratio (ACGR) is assessed as medium and stands at around 92 bps for the past five years.

The high-quality leasing portfolio. According to ACRA's estimates, the share of potentially problem leases stands at around 2% of the leasing portfolio as of September 30, 2020 (a decrease against 10% in the last year). ACRA assesses the credit quality of the largest lessees as fair high. The Agency notes the significant improvement in the portfolio quality in caused by, among others, stricter limits set for clients representing different business segments prone to the highest risks in both ordinary situation and, especially, crisis conditions. The decline in the share of potentially problem clients was also backed by the fast growth in the portfolio in 2020, as new clients, which represent the predominant share of the portfolio and who have not demonstrated their payment discipline in full, push down the share of potentially problem clients. The Agency sees no significant market or operational risks, which results in the strong risk profile assessment.

The satisfactory funding and liquidity assessment. The Company’s funding structure is moderately diversified. The Company raises funds from two main sources: debt securities (33% of assets as of September 30, 2020) and bank loans (41%). The share of the five largest bank lenders is satisfactory (34%). As of September 30, 2020, the Company had three outstanding bond issues totaling RUB 581,25 mln. The Company has plans to issue more bonds and obtain more bank credit lines and to maintain 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 1.1). In ACRA’s stress scenario, the need to raise emergency liquidity is insignificant. On the other hand, 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 not lower than 15% within the 12–18 month horizon;
  • The share of problem and potentially problem debt under leasing agreements less than 5%.

Potential outlook or rating change factors

  • Maintaining the current business model within the 12–18 month horizon;
  • CAR not lower than 15% within the 12–18 month horizon;
  • The share of problem and potentially problem debt under leasing agreements less than 5%.

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 the Company's market positions;
  • Considerable improvement in capital generation capacity.

A negative rating action may be prompted by:

  • A decline in capital adequacy due to rapid growth in business or increased cost of risk;
  • Deterioration in leasing portfolio quality;
  • Significant deterioration in liquidity position.

Rating components

Standalone creditworthiness assessment (SCA): bbb-.

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.

The credit rating of «TECHNO Leasing», L.L.C. was published by ACRA on December 27, 2019 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 RAS financial statements of «TECHNO Leasing», L.L.C. 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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