The credit rating of “TransFin-M” PC (hereinafter, TransFin-M, or the Company) is based on the adequate assessments of the business profile and capital adequacy, strong assessment of the risk profile, and adequate assessment of funding and liquidity.
TransFin-M is a specialized leasing company focused on operational and financial leasing of vehicles. The Company is among the largest Russian leasing companies in terms of lease portfolio size. TransFin-M is 75% owned by A. Taycher via JSC TFM-Garant. The Company’s senior executives control the remaining 25%.
KEY ASSESSMENT FACTORS
The adequate assessment of the business profile is due to TransFin-M strengthening its market positions in the area of operational leasing. An important role in this was played by the expansion of the fleet of railway cars over the past two years, which currently exceeds 71,000 units. The Company places significant focus on developing the special equipment operational leasing segment, which is evidenced by the signing of a number of major long-term contracts with representatives of the mining sector. Since April 2020, the Company has been part of the list of Russia’s systemically important transport enterprises. ACRA notes the management’s consistent realization of the Company’s strategy, which involves developing existing areas (operational leasing of rolling stock and special equipment, leasing of port equipment), as well as the development of new segments, such as leasing of forestry equipment and commercial real estate.
The growth of the car fleet increases the portfolio’s concentration on the railway transport segment, the share of which amounted to 86% as of June 30, 2021. ACRA also notes the poor diversification of the lease portfolio by clients, as the share of the ten largest lessees is around 93%. In addition, the majority of customers (at least 80% of the lease portfolio) are subsidiaries of TransFin-M. At the same time, the ultimate asset structure continues to be more diversified, as the majority of affiliated companies enter into subleasing transactions with a wide range of counterparties.
Adequate capital adequacy assessment. Transfin-M’s capital adequacy ratio (CAR) continues to be high, and stood at 21.2% as of June 30, 2021. The averaged capital generation ration (ACGR) for 2016–2020 amounted to 73.5 bps, which in combination with the CAR result in an adequate assessment of capital adequacy. Dividends were paid in Q4 2021 at the expense of profit from previous years, including from the sale of assets. The shareholder company intends to use dividends paid by the Company to repay a loan received from Transfin-M (as of September 30, 2021, this loan amounted to RUB 38.4 bln).
Strong risk profile assessment. The risk profile assessment continues to be strong because the Company has maintained the share of problem and potential problem debt at around 5%. ACRA notes that a significant share of assets (around 24% as of June 30, 2021) falls on a loan issued to the shareholder. At the same time, the Agency notes that the size of this debt has decreased along with its share in assets (as of September 30, 2021, the shareholder’s debt was 19% of assets).
The funding structure remains highly concentrated on the largest lender. As of June 30, 2021, the Company’s main source of funding was debt securities (44% of liabilities), while loans accounted for 19%. ACRA notes the Company’s growing dependence on the largest creditor, whose share accounted for 39% of liabilities as of June 30, 2021.
Satisfactory liquidity position. Considering the fact that there is still a significant share of encumbered fixed assets and investments in leasing on the balance sheet of TransFin-M, the amount of available assets that can be used to raise additional liquidity is limited. The Company has acceptable cash reserves at the end of each quarter over the next year in ACRA’s base case scenario, as the forecasted current liquidity ratio averages around 1.1. In ACRA’s stress scenario, the Company’s need to raise emergency liquidity is elevated. To mitigate risks, the Company enters into lease agreements with fixed rates for up to three years.
Maintaining the current business model within the 12 to 18-month horizon;
CAR above 15% within the 12 to 18-month horizon.
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 capital generation while maintaining high CAR;
Considerable increase in the diversification of creditors;
Pronounced improvement in the liquidity position.
A negative rating action may be prompted by:
Deterioration of the Company’s operating environment;
Weakened market positions;
Lower capital generation and/or substantial decrease in CAR;
Deterioration of lease portfolio quality;
Significant deterioration of liquidity position (including due to lower cash flow from operations).
Standalone creditworthiness assessment (SCA): bbb+.
“TransFin-M” PC, 001P-02-боб series (RU000A0JXK99), maturity date: February 22, 2027, issue volume: RUB 5 bln — BBB+(RU).
“TransFin-M” PC, 001P-03-боб series (RU000A0JXVB1), maturity date: June 28, 2027, issue volume: RUB 500 mln — BBB+(RU).
“TransFin-M” PC, 001Р-04 series (RU000A0ZYEB1), maturity date: October 14, 2027, issue volume: RUB 10 bln — BBB+(RU).
“TransFin-M” PC, 001P-05 series (RU000A0ZYFS2), maturity date: November 3, 2027, issue volume: RUB 600 mln — BBB+(RU).
“TransFin-M” PC 001P-06 series (RU000A100TS6), maturity date: September 3, 2029, issue volume: RUB 5 bln — BBB+(RU).
“TransFin-M” PC 002P-01 series (RU000A101EN7), maturity date: February 4, 2027, issue volume: RUB 48.66 bln — BBB+(RU).
“TransFin-M” PC 002P-012 series (RU000A101Q34), maturity date: February 4, 2027, issue volume: RUB 4.1 bln — BBB+(RU).
“TransFin-M” PC 001P-07 series (RU000A103M36), maturity date: August 18, 2031, issue volume: RUB 6.3 bln — BBB+(RU).
“TransFin-M” PC 001P-08 series (RU000A103WM7), maturity date: October 9, 2031, issue volume: RUB 1 bln — BBB+(RU).
Rationale. The bonds listed above represent senior unsecured debt of TransFin-M. Due to the absence of either structural or contractual subordination of the issues, ACRA regards them 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 reimbursement rate for unsecured debt is category II. Therefore, the bond issues are assigned the credit rating of BBB+(RU), i.e. on par with “TransFin-M” PC.
The credit ratings have been assigned to “TransFin-M” PC and the bonds (ISIN RU000A0JXK99, RU000A0JXVB1, RU000A0ZYEB1, RU000A0ZYFS2, RU000A100TS6, RU000A101EN7, RU000A101Q34, RU000A103M36, RU000A103WM7) issued by “TransFin-M” PC 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 Methodology for Assigning Credit Ratings to Individual Issues of Financial Instruments on the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.
The credit ratings of “TransFin-M” PC and the bonds (ISIN RU000A0JXK99, RU000A0JXVB1, RU000A0ZYEB1, RU000A0ZYFS2, RU000A100TS6, RU000A101EN7, RU000A101Q34, RU000A103M36, RU000A103WM7) issued by “TransFin-M” PC were published by ACRA for the first time on August 2, 2017, August 23, 2017, August 23, 2017, November 14, 2017, February 20, 2018, September 16, 2019, December 24, 2020, December 24, 2020, September 16, 2021, and October 28, 2021, respectively. The credit rating of “TransFin-M” PC and its outlook and the credit ratings assigned to the abovementioned bonds issued by “TransFin-M” PC 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 “TransFin-M” PC, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS consolidated statements of “TransFin-M” PC and the financial statements of “TransFin-M” PC drawn up in compliance with RAS. The credit ratings are solicited, and “TransFin-M” PC 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 additional services to “TransFin-M” PC. No conflicts of interest were discovered in the course of credit rating assignment.