The credit rating of TimeLeasing LLC (hereinafter, TimeLeasing, or the Company) is based on adequate assessments of the business profile and capital adequacy, strong risk profile assessment, and a moderately weak assessment of funding and liquidity.
TimeLeasing is a universal leasing company that specializes in leasing cars and trucks, road construction, building and logging equipment, and various types of other equipment to small and medium-sized businesses in Russia’s Far East and Siberia (as of the end of 2022, these regions accounted for 60% and 39% of the portfolio, respectively). TimeLeasing is headquartered in Vladivostok; the Company is continuously expanding its presence by opening representative offices in a number of cities in the Far East and Siberia.
KEY ASSESSMENT FACTORS
Adequate business profile assessment. ACRA notes the Company’s competitive advantages, high level of expertise and significant experience in working with clients and suppliers in its regions of presence. This allows it to be a leader in the Far Eastern Federal District and occupy confident positions in the Siberian Federal District. The Company’s portfolio was RUB 23.9 bln in 2022 (21% growth vs. 2021 and 2.5x growth compared to 2020).
ACRA assesses the diversification of the portfolio as sufficiently high and notes the low share of receivables from individual lessees (the share of the largest lessee does not exceed 3%, while the share of the ten largest accounts for about 20%). The bulk of the portfolio is cars and trucks (42%); building, road construction, and logging equipment accounts for 18%, 13%, and 6%, respectively. A further 7% is accounted for by warehouse equipment. In general, the liquidity of assets provided for leasing is estimated at above medium.
The quality of corporate governance and risk management is assessed as adequate, which is confirmed by business profitability and the historically low level of non-performing debt.
Adequate capital adequacy. According to TimeLeasing’s IFRS reporting, the capital adequacy ratio (CAR) was medium and amounted to 9.3% as of December 31, 2022. ACRA notes the Company’s rather high and consistent ability to generate profit — the averaged capital generation ratio (ACGR) calculated for the past five years is around 300 bps, taking into account dividend payments made by the Company. ACRA positively views the Company’s plans to increase its CAR, including by making regular dividend payments.
Strong risk profile assessment. ACRA notes the high quality of the Company’s lease portfolio. The volume of overdue payments over a horizon of four years does not exceed 1%, while potential overdue debt, in the Agency’s opinion, amounts to less than 5%.
The moderately weak funding and liquidity assessment stems from the low diversification of funding sources coupled with satisfactory liquidity. As of December 31, 2022, the Company’s liabilities were made up of bank loans (88%) and equity (9%). TimeLeasing takes out loans from a rather large number of banks, however, the share of the five largest banks stands at 62.5% of the Company’s liabilities and the largest lender accounts for 27%. The Company intends to enter the bond market, which when combined with growth in capitalization will enable it to improve diversification of funding sources in future.
The satisfactory liquidity position is due to the fact that the projected current liquidity ratio (PCLR) over the horizon of 12–24 months in ACRA’s base case scenario is about 1.08 (taking into account plans for the growth of new business and existing contracts). The Company does not have any planned major one-off repayments of liabilities over the next 12 to 24 months. In the stress scenario, the Company’s need to raise emergency liquidity is low. At the same time, the Agency takes into account TimeLeasing’s limited opportunities to raise emergency liquidity if necessary.
KEY ASSUMPTIONS
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Maintaining the current business model over the next 12 to 18 months;
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Share of problem and potential problem receivables in the lease portfolio at less than 5%.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Stable outlook assumes that the rating will highly likely stay unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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Significant strengthening in the Company’s position in Russia’s leasing market;
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Considerable growth in the Company’s capitalization;
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Considerable decline in the share of the largest source of borrowed funds in the portfolio amid higher diversification of the largest lenders.
A negative rating action may be prompted by:
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Deterioration in lease portfolio quality;
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Significant decline in CAR and/or the Company’s ability to generate capital.
RATING COMPONENTS
Standalone creditworthiness assessment (SCA): bbb.
Adjustments: none.
Support: none.
ISSUE RATINGS
There are no outstanding issues.
REGULATORY DISCLOSURE
The credit rating has been assigned to TimeLeasing LLC under the national scale for the Russian Federation based on the Methodology for Assigning Credit Ratings to Leasing Companies on 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 TimeLeasing LLC 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 data provided by TimeLeasing LLC, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the IFRS and RAS financial statements of TimeLeasing LLC. The credit rating is solicited and TimeLeasing LLC participated in its assignment.
In assigning the credit rating, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided no additional services to TimeLeasing LLC. No conflicts of interest were discovered in the course of credit rating assignment.
