The credit rating of TimeLeasing LLC (hereinafter, TimeLeasing, or the Company) is based on satisfactory assessments of the business profile, capital adequacy, and liquidity, a strong risk profile assessment, and a critical assessment of funding.
TimeLeasing is a universal leasing company that specializes in leasing cars and trucks, road construction and building equipment, as well as various types of other equipment to small and medium-sized businesses in Russia’s Far East and Siberia (as of the end of 2023, the shares of these regions in the portfolio were 56% and 42%, respectively). TimeLeasing is headquartered in Vladivostok, however, the Company is expanding its presence by opening representative offices in a number of cities in the Far East and Siberia.
KEY ASSESSMENT FACTORS
Satisfactory business profile assessment. TimeLeasing is a relatively small company. The volume of its internal funds as of December 31, 2023 was around RUB 2 bln. 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 29.8 bln in 2023 (25% growth vs. 2022).
ACRA rather highly assesses the liquidity of leased property and the diversification of the Company’s business. The bulk of the portfolio is cars and trucks (46%), while building and road construction accounts for 20%, and 10%, respectively. A further 6% is accounted for by buses and microbuses, while warehouse equipment accounts for 4.5%.
Corporate governance and the ownership structure are assessed by the Agency as medium, which is confirmed by the Company’s results.
Satisfactory capital adequacy assessment. According to TimeLeasing’s IFRS reporting, the capital adequacy ratio (CAR) was 10.2% in 2023, which is a medium level. 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 just below 300 bps, taking into account dividend payments. The Company plans to maintain its CAR at no lower than 10%, although ACRA does not expect ACGR to grow above 300 bps over the next 12–18 months, given TimeLeasing’s intent to pay dividends.
Strong risk profile assessment. ACRA notes the high quality of the Company’s lease portfolio. The volume of payments overdue by more than 90 days is well below 1%, while potential non-performing debt, taking into account timely work to seize and sell non-performing assets, amounts to less than 5% in the Agency’s opinion. ACRA also assesses the concentration of lease portfolio risks as high — as of December 31, 2023, the share of the ten largest lessees in the portfolio was just over 15% and was at the boundary of the range for a high score. Other types of the Company’s risks, as per ACRA’s estimates, are insignificant and do not influence the assessment of the factor.
The critical funding assessment is due to the absence of diversification of its sources. TimeLeasing’s main source of funding is bank loans (87% of liabilities as of December 31, 2023). The Company takes out loans from a large number of banks, however ACRA notes the concentration of the resource base on the largest of them — the share of the five largest lenders is 59% of liabilities, while the largest accounts for 28%. The Company continues to plan to enter the bond market, which when combined with growth in capitalization will enable it to improve the 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 around 1.09 (taking into account existing contracts and plans for the growth of new business). 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.
The credit rating of TimeLeasing LLC was published by ACRA for the first time on July 7, 2023. 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.
