The credit rating of Delta Leasing Company LLC (hereinafter, Delta, or the Company) is based on the satisfactory assessment of the business profile, strong assessment of the capital adequacy, high assessment of the risk profile, low diversification of the funding base, and satisfactory liquidity position.
Delta is a universal leasing company with its head office in Krasnoyarsk. It leases cars and trucks, road construction vehicles and construction equipment, as well as mining machinery, and equipment for the chemical industry. The Company’s customers include with both large businesses and SMEs, with the largest share of its leasing portfolio falling on small businesses. The Company’s operations are mainly concentrated in the Siberian and Far Eastern Federal Districts — 49% / 33% of the leasing portfolio and 57% / 36% of the total customer base, respectively, as of July 1, 2023.
KEY ASSESSMENT FACTORS
The business profile assessment is satisfactory, which is associated with the limited competitive advantages of Delta at the federal level due to the relatively small scale of its business. ACRA notes the high diversification of the Company's leasing portfolio: by the end of H1 2023, the main share (about 18%) fell on mining equipment and about 15% and 12% on passenger transport and road construction equipment, respectively. The Company maintains a low degree of dependence on suppliers, while the liquidity of leased equipment is assessed as medium.
In the Agency’s view, the Company’s shareholding structure is transparent. The ultimate beneficiary of the Company is an individual. The top management has a sufficient competence and experience in the industry; however, ACRA notes periodic changes in the management team and a significant concentration on the owner, who also acts as the Company’s director. Delta adheres to a conservative risk-taking approach; key transactions are considered at periodic meetings of the Company's high-risk profile committee.
Strong assessment of capital adequacy. The Company has enough reserves to absorb losses. As of July 1, 2023, capital adequacy ratio was 20.7%. In ACRA’s view, Delta’s capital generating capacity is high: the five-year average capital generation ratio, subject to adjustments, is above 300 bps. The Agency does not expect the profitability to decrease by the end of 2023.
High risk profile assessment. Delta adheres to a conservative policy with respect to its customers: the volume of payments overdue for more than 90 days does not exceed 2% of the portfolio, there are no restructured leasing agreements, and the volume of reclaimed assets is assessed as low. In addition, the analysis of the leasing portfolio shows that the volume of potentially non-performing assets does not exceed 5% of the total expected leasing payments. Apart from the leasing business, the Company also provides small loans to its business partners, uses overnight deposits with credit institutions, and deals in shares and bonds of Russian issuers. In addition, the Company owns and leases an investment property. Among other investments made in 2023, Delta acquired a plant that manufactures components and accessories for motor vehicles, which previously belonged to a Spanish manufacturing group.
The assessment of funding and liquidity is moderately weak due to the low diversification of the resource base and the satisfactory level of liquidity. As of July 1, 2023, the main source of funds for the Company were bank loans — about 70% of the funding base. The share of the five largest creditors as of the same date was 61.1% (taking into account the adjustments applied by ACRA), and the largest group of creditors accounted for 31.5% of liabilities.
The liquidity position is satisfactory because the current liquidity ratio forecasted for the next 12–24 months in ACRA’s base case scenario is about 1.04; in the stress scenario, the Company’s need to raise additional funds is viewed as low.
key assumptions
-
Maintaining the current business model in the next 12–18 months.
-
CAR at no lower than 15% in the next 12–18 months.
-
The share of non-performing and potentially non-performing assets is less than 5% of the lease portfolio.
potential outlook or rating change factors
The Stable outlook assumes that the credit rating will highly likely remain unchanged within the 12 to 18-month horizon.
A positive rating action may be prompted by:
-
Much stronger positions of the Company in the Russian leasing market;
-
Much better diversification of the funding base.
A negative rating action may be prompted by:
-
Worse quality of the lease portfolio;
-
Much lower CAR and/or the Company’s capital generation capacity;
-
Significant share of non-core assets on the balance sheet.
rating components
Standalone creditworthiness assessment (SCA): bbb.
Adjustments: none.
Support: no.
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.
The credit rating has been assigned to Delta Leasing Company 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 Delta Leasing Company LLC, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the RAS financial statements of Delta Leasing Company LLC. The credit rating is solicited, and Delta Leasing Company 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 Delta Leasing Company LLC. No conflicts of interest were discovered in the course of credit rating assignment.
