The credit rating of JSC “GTLK” (hereinafter, GTLK or the Company) has been upgraded due to the improved assessment of the state’s influence on the Company’s creditworthiness. This assessment was formed based on the Methodology for Analyzing Rated Entities Associated with the State or a Group, which is valid from April 19, 2021. The credit rating of GTLK is based on the high likelihood of extraordinary support being provided to the Company by the state. The Company’s standalone creditworthiness assessment (SCA) is satisfactory. The Company’s creditworthiness is assessed as high compared to other Russia-based issuers.
GTLK is a specialized leasing company focused on financial and operating lease of vehicles. Being an entirely state-owned company (its sole shareholder is the Russian government represented by the Ministry of Transport), GTLK is instrumental in the implementation of the state’s transportation development policy.
According to ACRA’s estimates, the Company was the leader in terms of lease portfolio size and new leasing business in Russia in 2020.
Key rating assessment factors
Very high likelihood of extraordinary support from the Russian government. In ACRA’s opinion, if necessary the state may provide long-term and short-term financing to the Company, as well as carry out capital injections, in view of the following factors:
- GTLK plays an important role in the implementation of the state’s industrial and transportation development policy;
- The Company is one of the leaders in the aviation, railway and water transportation leasing segments with regard to implementation of state and national programs;
- GTLK is among the systemically important organizations of the Russian economy and the systemically important organizations of the transport sector of the Russian Federation;
- The state, which owns a 100% stake in GTLK, exercises complete strategic and operational control over the Company; the Board of Directors of GTLK includes representatives of various ministries, including the Ministry of Transport;
- GTLK’s capital was formed through a series of capital injections from the state (around RUB 120 bln in total, including RUB 5 bln in Q1 2021).
ACRA assesses the likelihood of future capital injections for GTLK as high, taking into account its importance for the Russian transportation industry. At the same time, if the financial standing of the Company were to deteriorate, required budgetary injections would have a relatively limited negative impact on the national economy and the social sector. This may limit the amount and priority of support that the state is ready to provide to GTLK.
ACRA expresses its overall opinion on state support by setting GTLK’s final rating at parity with the Russian Federation minus three notches.
The adequate business profile is based on GTLK’s very strong standing in the Russian leasing market and the aviation, railway and water transportation leasing segments. The factor’s assessment is limited by the consistent concentration of the Company’s lease portfolio on lessees. As of the end of 2020, the ten largest lessees accounted for 59% of the lease portfolio (compared to 63% a year before), while the largest client’s share was 25% of the portfolio (26% as of the end of 2019). The growth of the share of the lease portfolio occupied by water transportation means that the portfolio is more evenly diversified. As of the end of 2020, the Company’s lease portfolio was made up of the following shares: railway transport — 42.3%, airport servicing — 41.2%, and water transport — 11.7%.
Lower loss absorption buffer coupled with consistently limited capital generation capacity. The rapid growth of the Company’s business continues to put pressure on its capital adequacy ratio (CAR). As of the end of 2020, the CAR had fallen to 11.6% compared to 13.4% as of the end of 2019. ACRA assumes that the CAR may continue to decline due to rapid growth of the Company’s business, despite plans to provide a capital injection, which will lead to a lower capital adequacy assessment. At the same time, GTLK’s internal capital generation capacity remains low. The Company recorded a pre-tax profit of around RUB 0.5 bln in 2020. The averaged capital generation ratio (ACGR) for 2016–2020 remains at -15 bps. The Company’s profitability is strongly limited due to the implementation of non-commercial (concessionary) leasing programs. ACRA notes that the purposes of GTLK as an agent established to implement the state’s transportation policy do not require it to maintain high returns.
The risk profile assessment is constrained by the share of problem assets in the Company’s lease portfolio. In 2020, the share of overdue debt in the lease portfolio was 1.4%. The total amount of overdue (by more than 90 days) obligations under agreements with lessees reached 12.7%. Certain lessees were recognized as potentially problematic after an assessment of their financial indicators for 2020, which increases ACRA’s assessment of the share of potentially problem assets in the lease portfolio to 32%.
Balanced funding structure. The Company maintains a stably diversified funding structure. As of the end of the 2020, its liabilities mainly included bonds (47%) and bank loans (35%). The Company’s dependence on certain lenders is assessed as acceptable: payables due to the largest lender amounted to 6.9% of GTLK’s total liabilities as of the end of 2020, while payables due to the five largest lenders stood at 21.6%.
Adequate liquidity position. Under ACRA’s base case scenario (and taking into account GTLK’s plans to grow its leasing business), the Company has positive cash reserves (the estimated current liquidity ratio is just above 1.0 within the 12-month horizon). The Company’s temporary structure of assets and liabilities is balanced. Under ACRA’s stress scenarios, GTLK’s need for emergency liquidity is moderate. At the start of 2020, the Company significantly increased its available cash reserves, which considerably reduces the risks of resorting to additional borrowing in situations of stress.
GTLK plays a crucial supporting role for the Russian Ministry of Transport in implementing a number of state-run programs in the transportation sector. The Company’s services are in high demand, mostly in the aviation segment, as well as in other niche transportation segments. In 2020, the Russian Government decided to use GTLK as the basis for the creation of a single leasing company as part of its development institution reforms. ACRA considers these factors to be a significant competitive advantage that is not reflected in the Company’s SCA. This translates into a higher creditworthiness for GTLK, and therefore results in one notch being added to the SCA.
- Maintaining the current business model within the 12 to 18-month horizon;
- CAR at no lower than 11% within the 12 to 18-month horizon;
- Maintaining the current funding structure.
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:
- Increased systemic importance of the Company resulting from growing state funding and higher involvement of the Company in the state’s transportation policy.
A negative rating action may be prompted by:
- Loss of shareholder control by the Russian Federation, or lower propensity of the controlling shareholder to support the Company;
- Lower systemic importance of the Company for the state.
Adjustments: plus 1 notch to the SCA.
Support: state support, parity with the RF minus 3 notches.
GTLK, 002Р-01 series (RU000A102VR0), maturity date: March 3, 2036, issue volume: RUB 10 bln — АA-(RU).
GTLK, 001Р-19 series (RU000A101SD8), maturity date: May 23, 2035, issue volume: RUB 5 bln — АA-(RU).
GTLK, 001Р-18 series (RU000A101SC0), maturity date: May 23, 2035, issue volume: RUB 5 bln — АA-(RU).
GTLK, 001Р-17 series (RU000A101QL5), maturity date: May 14, 2035 issue volume: RUB 10 bln — АA-(RU).
GTLK, 001Р-16 series (RU000A101GD3), maturity date: February 17, 2028, issue volume: RUB 10 bln — АA-(RU).
GTLK, 001Р-15 series (RU000A100Z91), maturity date: October 21, 2025 issue volume: RUB 25 bln — АA-(RU).
GTLK, 001P-14 series (RU000A100FE5), maturity date: May 25, 2034, issue volume: RUB 10 bln — АA-(RU).
GTLK, 001P-13 series (RU000A1003A4), maturity date: January 20, 2034, issue volume: RUB 10 bln — АA-(RU).
GTLK, 001P-12 series (RU000A0ZZV11), maturity date: November 4, 2033, issue volume: RUB 5 bln — АA-(RU).
GTLK, 001P-11 series (RU000A0ZZAL5), maturity date: June 3, 2033, issue volume: USD 150 mln — АA-(RU).
GTLK, 001P-10 series (RU000A0ZZ984), maturity date: May 20, 2033, issue volume: RUB 10 bln — АA-(RU).
GTLK, 001P-09 series (RU000A0ZZ1J8), maturity date: March 18, 2033, issue volume: RUB 10 bln — АA-(RU).
GTLK, 001P-08 series (RU000A0ZYR91), maturity date: January 18, 2033, issue volume: RUB 10 bln — АA-(RU).
GTLK, 001P-07 series (RU000A0ZYNY4), maturity date: December 31, 2032, issue volume: RUB 10 bln — АA-(RU).
GTLK, 001P-06 series (RU000A0ZYAP9), maturity date: September 1, 2032, issue volume: RUB 20 bln — АA-(RU).
GTLK, 001P-04 series (RU000A0JXPG2), maturity date: April 6, 2032, issue volume: RUB 10 bln — АA-(RU).
GTLK, 001P-03 series (RU000A0JXE06), maturity date: January 22, 2032, issue volume: RUB 10 bln — АA-(RU).
GTLK, 001P-02 series (RU000A0JX199), maturity date: November 24, 2031, issue volume: RUB 7.78 bln — АA-(RU).
Rationale. The issues represent senior unsecured debt instruments of State Transport Leasing Company JSC. Due to the absence of either structural or contractual subordination of the issues, ACRA regards them as pari passu with other existing and future unsecured and unsubordinated debt obligations of the Company. According to ACRA’s methodology, the unsecured debt repayment level corresponds to the second category. Therefore, the credit rating of the issues is equivalent to that of JSC “GTLK”.
The credit ratings have been assigned to JSC “GTLK” and the bonds (ISIN RU000A0JX199, RU000A0JXE06, RU000A0JXPG2, RU000A0ZYAP9, RU000A0ZYNY4, RU000A0ZYR91, RU000A0ZZ1J8, RU000A0ZZ984, RU000A0ZZAL5, RU000A0ZZV11, RU000A1003A4, RU000A100FE5, RU000A100Z91, RU000A101GD3, RU000A101QL5, RU000A101SC0, RU000A101SD8, RU000A102VRO) issued by JSC “GTLK” 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, the 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 credit ratings to the above issues.
The credit rating of JSC “GTLK” was published by ACRA for the first time on June 28, 2017 and the credit ratings of the bonds issued by State Transport Leasing Company JSC were published by ACRA for the first time on July 25, 2017 (RU000A0JX199, RU000A0JXE06, RU000A0JXPG2), September 21, 2017 (RU000A0ZYAP9), January 23, 2018 (RU000A0ZYNY4), February 6, 2018 (RU000A0ZYR91), April 6, 2018 (RU000A0ZZ1J8), June 8, 2018 (RU000A0ZZ984), June 22, 2018 (RU000A0ZZAL5), November 23, 2018 (RU000A0ZZV11), February 7, 2019 (RU000A1003A4), June 11, 2019 (RU000A100FE5), October 28, 2019 (RU000A100Z91), February 27, 2020 (RU000A101GD3), May 29, 2020 (RU000A101QL5), June 9, 2020 (RU000A101SC0, RU000A101SD8), and March 19, 2021 (RU000A102VRO). The credit rating of State Transport Leasing Company JSC and its outlook as well as the credit ratings of the bonds of State Transport Leasing Company JSC (RU000A0JX199, RU000A0JXE06, RU000A0JXPG2, RU000A0ZYAP9, RU000A0ZYNY4, RU000A0ZYR91, RU000A0ZZ1J8, RU000A0ZZ984, RU000A0ZZAL5, RU000A0ZZV11, RU000A1003A4, RU000A100FE5, RU000A100Z91, RU000A101GD3, RU000A101QL5, RU000A101SC0, RU000A101SD8, RU000A102VRO) 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 JSC “GTLK”, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the consolidated IFRS financial statements of JSC “GTLK” and the RAS financial statements of JSC “GTLK”. The credit ratings are solicited, and JSC “GTLK” 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 JSC “GTLK”. No conflicts of interest were discovered in the course of credit rating process.