The credit rating of DirectLeasing Ltd (hereinafter, DirectLeasing, or the Company) is based on the moderately low assessment of the business profile, satisfactory capital adequacy assessment, low risk profile assessment, as well as the satisfactory assessment of funding and liquidity.
DirectLeasing is a leasing company that has operated in the market for more than 11 years. The Company leases out passenger vehicles and trucks, buses, special-purpose machinery, equipment, and real estate. The Company’s clients include small and medium-sized enterprises, sole proprietors, and individuals, mainly in the Central Federal District (this region accounted for 78% of the portfolio as of June 30, 2021). The Company’s sole owner is V. O. Bochkov.
key assessment factors
Moderately low business profile assessment. In H1 2021, DirectLeasing held insignificant positions in terms of volume of new business and lease portfolio size among Russian leasing companies. The volume of the portfolio grew by 71% over the 12 months preceding October 31, 2021 and recorded 24% growth in 2020. The largest shares of business are contributed by leasing of passenger vehicles and trucks (50% of the portfolio), buses and minibuses (15%), and metallurgy industry equipment (7%). Other leasing business accounts for comparatively small shares. ACRA assesses the liquidity of leased assets as above average. Diversification of the current lease portfolio in terms of counterparties is average. As of June 30, 2021, the largest client’s share in the lease portfolio was 7.3%, while the aggregate share of the ten largest clients was 37%.
Satisfactory capital adequacy assessment. The Company has relatively low business profitability. The averaged capital generation ratio (ACGR) for the past five years amounts to around 60 bps. According to RAS reporting for 6M 2021, the capital adequacy ratio was 9.8%. The Company does not pay dividends in order to maintain its growth. Besides this, in 2021 the shareholder made an additional contribution of RUB 50 mln to the charter capital.
Low quality lease portfolio. As of June 30, 2021, contracts with overdue debt accounted for 12.6% of the lease portfolio. The total sum of problem and potentially problem debt amounts to 14.8% of expected revenues from leasing, which results in low assessments of the quality of the portfolio and the risk profile. However, ACRA notes that the Company does not have any significant market and operational risks.
Diversified funding structure. The main source of funding for the Company is debt obligations (48% of the balance sheet total minus deferred income for 6M 2021). As of June 30, 2021, the Company had four outstanding bonds issues worth a total of RUB 500 mln. In addition, DirectLeasing actively uses bank loans and loans from individuals (24% of the aforementioned base). The five largest lending banks account for 18% of funding.
Satisfactory liquidity position. In the base case scenario, which takes into account plans to develop new business, the Company demonstrates positive cash flow at the end of every quarter over the next 12–24 months (the projected current liquidity ratio exceeds 1.0). In the stress scenario, a liquidity deficit is possible which may be overcome through prompt management of cash flows by adjusting the number of new lease contracts.
key assumptions
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Maintaining the current business model over the 12 to 18-month horizon;
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CAR under RAS at no less than 8% over the next 12 to 18-months;
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Share of problem and potential problem debt in the lease portfolio at less than 20%.
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:
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Strengthening of the Company’s positions in the Russian leasing market;
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Improved capital adequacy assessment;
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Lower share of problem debt;
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Improved funding and liquidity position.
A negative rating action may be prompted by:
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Significant decline in capital adequacy due to active growth of business or higher cost of risk;
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Deterioration of lease portfolio quality;
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Deterioration of funding and liquidity position.
rating components
SCA: bb-.
Adjustments: none.
issue ratings
No outstanding issues have been rated.
regulatory disclosure
The credit rating has been assigned 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 DirectLeasing Ltd 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 DirectLeasing Ltd, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the RAS financial statements of DirectLeasing Ltd. The credit rating is solicited, and DirectLeasing Ltd participated in its assignment.
In assigning the credit rating, 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 DirectLeasing Ltd. No conflicts of interest were discovered in the course of credit rating assignment.
