The credit rating of PJSC «LC «Europlan» (hereinafter, Europlan, or the Company) is based on the strong assessments of the business profile, capital adequacy, and risk profile, and the adequate funding and liquidity position. The credit rating outlook has been changed fr om Stable to Positive to reflect the increased business diversification of the Company in terms of both the structure of its operational income and the structure of its resource base.
Europlan is a leading motor lease company operating a large branch network covering all federal districts of the Russian Federation. The Company is focused on financial lease services provided primarily to small and medium-sized enterprises with respect to passenger, cargo, commercial vehicles, and construction machinery.
KEY ASSESSMENT FACTORS
Europlan’s strong business profile is based on the high quality of corporate governance and risk management, which have contributed to the effective implementation of corporate strategy and financial performance outpacing peers over a long period of time. The leasing portfolio diversification is assessed as high (the 50 largest clients accounted for no more than 8% of the leasing portfolio as of March 31, 2022). At the same time, the concentration on leased items (cars and trucks) is assessed as significant (passenger and cargo vehicles account for 90% of the portfolio), which, however, is offset by their high liquidity. ACRA notes that over the recent years, the Company has increased the share of non-interest proceeds in its revenues, which pushes down the dependence of its financial performance on lease payments and loan interest rates. Until 2022, the Company maintained a strategy of relatively aggressive growth (in 2021, net leasing investments exceeded 60%), which, however, is in line with the industry trends.
Europlan’s stable capital position is primarily based on the availability of a substantial loss absorption buffer, given the high capital adequacy ratio (CAR) at 16.2% as of March 31, 2022, as well as the Company’s strong capital generation capacity without any external injections (the averaged capital generation ratio (ACGR) exceeded 400 bps in the last five years, taking into account dividend payments).
The strong risk profile assessment reflects primarily the high quality of the leasing portfolio wh ere potentially problem assets, in ACRA’s opinion, is less than 1% (based on the estimated IFRS 9 Stage 3 loans and the analysis of the 30 largest lessees) including the share of NPL90+of March 31, 2022, which does not exceed 0.01% of the portfolio. The industry concentration of the leasing portfolio is acceptable. There are no investments in non-core assets booked on the Company’s balance sheet. Market and operational risks are negligible.
The adequate funding and liquidity position is based on Europlan’s low refinancing needs with respect to the current obligations in the next 24 months, which is confirmed by the capability to timely repay and service the existing debt even if there is no new business. At the same time, owing to its business specifics, the Company can promptly respond to changes in economic trends that influence the effective demand for the leasing items offered. The Company’s top funding source is bank loans (49% of liabilities and equity as of March 31, 2022 against 43% as of March 31, 2021); issued securities represent another 28% of liabilities and equity (33% as of March 31, 2021). Moreover, the Company is tending to use these two sources in an equal proportion. ACRA notes a notable decline in the reliance of the resource base on the funds of the largest lender (13.2%), while the concentration on the five largest lenders has remained elevated (38.6%). ACRA also notes that the Company's need to raise emergency liquidity is elevated in the stress scenario, which, however, is offset the availability of substantial credit facilities and a significant amount of unencumbered liabilities of lessees.
KEY ASSUMPTIONS
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No changes to the business model within the 12 to 18-month horizon.
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Business growth rates of 5–15% in 2022–2024.
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CAR of at least 15% within the 12 to 18-month horizon.
POTENTIAL OUTLOOK OR RATING CHANGE FACTORS
The Positive outlook assumes that the rating will highly likely be upgraded within the 12 to 18-month horizon.
A positive rating action may be prompted by:
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Increased operational non-reliance of the Company on its affiliates;
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Further growth of business diversification in terms of operational income structure, and declining reliance of the resource base on the largest lenders and funding sources.
A negative rating action may be prompted by:
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Substantial deterioration in the financial standing of the Company's affiliates and the accompanying risk of liquidity outflow in their favor;
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Substantial decrease in CAR due to active business growth, dividend payments or increase in the cost of risk;
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Significantly deteriorating quality of the leasing portfolio;
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Negative changes in the liquidity position
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Significant growth of the concentration on the largest lenders.
RATING COMPONENTS
Standalone Creditworthiness Assessment (SCA): а+.
Adjustments: none.
Support: none.
ISSUE RATINGS
PJSC «LC «Europlan», certified exchange-traded interest-bearing non-convertible unregistered bond subject to mandatory deposit, BO-08 series (ISIN RU000A0ZZBV2), maturity date: June 20, 2028, issue volume: RUB 5 bln — А+(RU).
PJSC «LC «Europlan», certified exchange-traded interest-bearing non-convertible unregistered bond subject to mandatory deposit, BO-05 series (RU000A1004K1), maturity date: February 14, 2029, issue volume: RUB 3 bln — A+(RU).
PJSC «LC «Europlan», certified exchange-traded interest-bearing non-convertible unregistered bond subject to mandatory deposit, BO-06 series (RU000A100DG5), maturity date: May 15, 2029, issue volume: RUB 3 bln — A+(RU).
PJSC «LC «Europlan», certified exchange-traded interest-bearing non-convertible unregistered bond subject to mandatory deposit, BO-03 series (RU000A100W60), maturity date: September 20, 2029, issue volume: RUB 5 bln — A+(RU).
PJSC «LC «Europlan», uncertified exchange-traded interest-bearing non-convertible unregistered bond subject to centralized title registration, 001P-01 series (RU000A102RU2), maturity date: August 13, 2024, issue volume: RUB 13 bln — A+(RU).
PJSC «LC «Europlan», uncertified exchange-traded interest-bearing non-convertible unregistered bond subject to centralized title registration, 001P-02 series (RU000A1034J0), maturity date: May 17, 2024, issue volume: RUB 10 bln — A+(RU).
PJSC «LC «Europlan», uncertified exchange-traded interest-bearing non-convertible unregistered bond subject to centralized title registration, 001Р-03 series (ISIN RU000A103KJ8), maturity date: August , 2031, issue volume: RUB 7 bln — А+(RU).
PJSC «LC «Europlan», uncertified exchange-traded interest-bearing non-convertible unregistered bond subject to centralized title registration, 001Р-04 series (ISIN RU000A103S14), maturity date: March 25, 2025, issue volume: RUB 7 bln — А+(RU).
Credit rating rationale. The issues listed above represent senior unsecured debt of Europlan. 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 recovery rate of unsecured debt belongs to category I; therefore, the credit ratings of the issues are equivalent to that of Europlan, i.e. A+(RU).
REGULATORY DISCLOSURE
The credit ratings of PJSC «LC «Europlan» and the bonds (ISIN RU000A0ZZBV2, RU000A1004K1, RU000A100DG5, RU000A100W60, RU000A102RU2, RU000A1034J0, RU000A103KJ8, RU000A103S14) issued by PJSC «LC «Europlan» were 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, 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 Under the National Scale for the Russian Federation was also applied to assign credit ratings to the above issues.
The credit ratings of PJSC «LC «Europlan» and the bonds (ISIN RU000A0ZZBV2, RU000A1004K1, RU000A100DG5, RU000A100W60, RU000A102RU2, RU000A1034J0, RU000A103KJ8, RU000A103S14) issued by PJSC «LC «Europlan» were published by ACRA for the first time on December 28, 2017, July 3, 2018, February 27, 2019, May 28, 2019, October 2, 2019, February 16, 2021, May 21, 2021, August 20, 2021, and September 29, 2021, respectively. The credit rating and credit rating outlook of PJSC «LC «Europlan» and the credit ratings of the bonds (ISIN RU000A0ZZBV2, RU000A1004K1, RU000A100DG5, RU000A100W60, RU000A102RU2, RU000A1034J0, RU000A103KJ8, RU000A103S14) issued by PJSC «LC «Europlan» are expected to be revised within one year following the publication date of this press release.
The credit ratings were assigned based on the data provided by PJSC «LC «Europlan», information from publicly available sources, as well as ACRA’s own databases. The rating analysis was performed using the IFRS consolidated statements of PJSC «LC «Europlan» and the statements of PJSC «LC «Europlan» drawn up in compliance with RAS. The credit ratings are solicited, and PJSC «LC «Europlan» 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 PJSC «LC «Europlan». No conflicts of interest were discovered in the course of credit rating assignment.
