The credit rating of “Sovcombank Leasing”, LLC (hereinafter, Sovcombank Leasing or the Company) is based on a similar rating action 1 performed by ACRA with regard to the credit rating of the supporting organization — PJSC Sovcombank (AA-(RU), outlook Stable; hereinafter, Sovcombank, the Supporting Organization, the SO, or the Group) and the Agency’s expectations that the Company will maintain its stable ties with the parent banking group over the next 12 to 18 months.
ACRA revised its approach to determining the final rating of Sovcombank Leasing due to the fact that the new Methodology for Analyzing Rated Entities Associated with the State or a Group came into force on April 19, 2021. In particular, the Agency assesses the level of Group support as very high and sets the Company’s creditworthiness two notches below the credit rating of the Supporting Organization.
The Company’s standalone creditworthiness assessment (SCA) is based on strong capital adequacy, an adequate business profile and risk profile, and also a satisfactory funding and liquidity position 2.
1 ACRA upgrades PJSC Sovcombank to AA-(RU), changes outlook to Stable, upgrades bond issues RU000A0ZYJR6, RU000A100DZ5, RU000A101MB5, XS2291914971, RU000A102G01 to AA-(RU), RU000A0ZYWZ2, XS2010043656 to A-(RU), and affirms BB+(RU) to RU000A0ZYX28.
2 ACRA affirms A-(RU) to «Sovcombank Leasing», LLC, changes outlook to Positive, and A-(RU) to its bond issue (RU000A0ZZZN8).
Sovcombank Leasing occupies relatively stable positions among medium-sized leasing companies focusing on the financial lease of vehicles, primarily in the truck segment. Over the next 12 to 18 months, the Agency assumes that the Company will maintain its stable capitalization indicators and relatively high business profitability. These advantages, as well as the potential for external support from Sovcombank, partially mitigate enhanced credit risks associated with current and expected rapid growth of the Company’s leasing portfolio over the next 12 to 18 months.
Key rating assessment factors
Very high level of support from the Group. ACRA believes that in case of an emergency, Sovcombank is able and willing to promptly provide the Company with both short-term and long-term financing, as well as to inject capital. This opinion is based on the following factors:
- Full strategic control exercised by the SO and the strong legal and operational ties between Sovcombank and the Company;
- Developing the Company’s activities is part of the Group’s strategy concerning auto lending and leasing, and the Company regularly receives financing from Sovcombank (17% of liabilities according to IFRS reporting as of December 31, 2020);
- As the Company operates under a similar brand, a failure of Sovcombank Leasing would, in ACRA’s opinion, be associated with the SO, which would in turn be subject to serious reputational risks.
- Likelihood of extraordinary support from the SO;
- Maintaining the current business model of the Company over the next 18 months;
- Problem leases at no higher than 10% of the portfolio;
- Capital adequacy ratio at no lower than 15% over the next 18 months.
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:
- Higher creditworthiness of the SO and/or signs of stronger ties with the Supporting Organization.
A negative rating action may be prompted by:
- Reduced propensity of the SO to support the Company or lower creditworthiness of the SO.
Support: SCA of the Supporting Organization minus two notches.
Bond issued by «Sovcombank Leasing», LLC, 001P-01 series (RU000A0ZZZN8), maturity date: December 21, 2021, issue volume: RUB 3 bln — А(RU).
Rationale. The issue is a senior unsecured debt instrument of «Sovcombank Leasing», LLC. Due to the absence of either structural or contractual subordination of the issue, ACRA regards it as equal to other existing and future unsecured and unsubordinated debt obligations of the Company in terms of priority. According to ACRA’s methodology, the recovery rate for unsecured debt belongs to category I; hence, the credit rating of the issue is equivalent to that of «Sovcombank Leasing», LLC, i.e. A(RU).
The credit ratings of «Sovcombank Leasing», LLC and the bond issued by «Sovcombank Leasing», LLC (ISIN RU000A0ZZZN8) have been assigned under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Leasing Companies under the National Scale for the Russian Federation, Methodology for Analyzing Rated Entities Associated with the State or a Group, and the Key Concepts Used by the Analytical Credit Rating Agency Within the Scope of Its Rating Activities. The Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments on the National Scale for the Russian Federation was also applied to assign the credit rating to the above issue.
The credit ratings of «Sovcombank Leasing», LLC and the bond issued by «Sovcombank Leasing», LLC (ISIN RU000A0ZZZN8) were published by ACRA for the first time on December 27, 2017 and December 25, 2018, respectively. The credit rating and credit rating outlook of «Sovcombank Leasing», LLC and the credit rating of the bond issued by «Sovcombank Leasing», LLC (ISIN RU000A0ZZZN8) are expected to be revised within one year following the publication date of this press release.
The credit ratings were assigned based on data provided by «Sovcombank Leasing», LLC, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS consolidated statements of «Sovcombank Leasing», LLC and statements of «Sovcombank Leasing», LLC drawn up in compliance with RAS. The credit ratings are solicited, and «Sovcombank Leasing», LLC participated in their assignment.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which was, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to «Sovcombank Leasing», LLC. No conflicts of interest were discovered in the course of credit rating assignment.