The credit rating of Simple solutions Leasing company LLC (hereinafter, the Company) is based on the satisfactory assessments of the business profile, capital adequacy and liquidity, the strong assessment of funding, and the adequate risk profile assessment.
The outlook has been changed from Negative to Stable because the Company has not only capitalized part of its profits, but has also, in H2 2023 and 2024, received a capital injection from the owner. Thanks to this, the risks of a decrease in capital adequacy, which were included in ACRA’s outlook for the Company’s credit rating, established as part of its previous revision, were not realized.
The Company is a medium-sized full-service leasing company, whose main activities include the financial leasing of vehicles and equipment to customers from various industries and regions in the Russian Federation. The Company is the largest asset of the Simple Solutions Capital investment holding, which also includes financial (leasing company Simple solutions Leasing LLC, Simple solutions Factoring company LLC) and non-financial companies. The Company’s ultimate beneficiary is an individual associated with its management team.
KEY ASSESSMENT FACTORS
Satisfactory business profile assessment. The Company’s internal funds amounted to around RUB 1.1 bln as of December 31, 2023. Due to the active signing of contracts in 2023 and since the start of 2024, the size of the lease portfolio grew by 1.5 times last year and by 18% in H1 2024 relative to the indicator at the start of the year (RUB 13.5 bln as of June 30, 2024).
ACRA notes the high diversification of the Company’s business, which is present in almost all of Russia’s federal districts. As of December 31, 2023, the portfolio structure was dominated by cars and trucks (28% of the total portfolio), road construction equipment (10%), and special equipment (10%); in general, various types of equipment account for around 37% of the portfolio, and the largest segment in it is metallurgical equipment (16% of the total portfolio). ACRA estimates the liquidity of leased assets as satisfactory.
Corporate governance and the ownership structure are assessed by the Agency as medium; the validity of the assessment is confirmed by the results of the Company’s activities.
Satisfactory capital adequacy assessment. The capital adequacy ratio (CAR) calculated in accordance with ACRA’s methodology was 12%. The averaged capital generation ratio (ACGR) calculated for the past five years is around 244 bps. The Agency notes that the CAR grew by the end of 2023, including due to the capital injection, but notes that by the end of 2024, the Company expects its CAR and capital generation to decline due to assets growing faster than profits.
Adequate risk profile assessment. As of December 31, 2023, overdue and restructured leasing contracts in the leasing portfolio were practically absent. According to ACRA’s estimates, the credit quality of the largest lessees remains rather high.
The concentration of the lease portfolio’s risks is assessed as medium — the share of the 10 largest clients amounted to 36.5% as of December 31, 2023. The Agency also does not see significant market and operational risks for the Company that could weaken the overall adequate assessment of the risk profile.
Strong funding assessment. The funding structure is highly diversified. Its main source is bank loans, which accounted for around 50% of liabilities as of December 31, 2023. ACRA also notes continuing growth of diversification of funding between credit institutions. As of December 31, 2023, the share of the largest creditor accounted for 9% of liabilities, while the five largest accounted for 33%. The Company also actively uses bond market instruments. Currently the Company has three outstanding bond issues worth a total of RUB 3.65 bln.
Satisfactory liquidity position. In ACRA’s base case scenario, which takes into account plans to develop new business, the Company exhibits a positive cash reserve at the end of each quarter for the next 12−24 months (the forecasted current liquidity ratio exceeds 1.0). In ACRA’s stress scenario, a liquidity deficit is possible. However, this can be overcome through operational cash flow management by adjusting the number of new lease contracts.
KEY ASSUMPTIONS
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Maintaining the current business model within the 12 to 18-month horizon;
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Share of lease contracts with overdue payments under 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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Strengthened position in the Russian leasing market;
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CAR at 12% or higher coupled with no deterioration of other rating factors.
A negative rating action may be prompted by:
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Decline in the Company’s sustainability due to the fast expansion of business and the growth of share of non-core assets on the balance sheet;
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Deterioration in lease portfolio quality;
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Deterioration in the liquidity and funding position.
rating components
SCA: bbb+.
Adjustments: none.
ISSUE RATINGS
Exchange-traded non-convertible interest-bearing certificated bond subject to mandatory deposit issued by Simple solutions Leasing company LLC, series 001P-03 (ISIN RU000A100Q35), maturity date: July 7, 2026, issue volume: RUB 400 mln — BBB+(RU).
Exchange-traded non-convertible interest-bearing uncertificated bond subject to centralized title registration issued by Simple solutions Leasing company LLC, series 002P-01 (ISIN RU000A1022E6), maturity date: August 10, 2029, issue volume: RUB 1.75 bln — BBB+(RU).
Exchange-traded non-convertible interest-bearing uncertificated bond subject to centralized title registration issued by Simple solutions Leasing company LLC, series 002P-02 (ISIN RU000A106EР1), maturity date: May 6, 2032, issue volume: RUB 1.5 bln — BBB+(RU).
Rationale. Due to the absence of either structural or contractual subordination of the issues, ACRA regards them as equal to other existing and future unsecured and unsubordinated debt obligations of the Company in terms of priority. According to ACRA’s methodology, the recovery rate of the unsecured debt belongs to category I. Therefore, the credit ratings of the issues are equivalent to that of Simple solutions Leasing company LLC, i.e. BBB+(RU).
REGULATORY DISCLOSURE
The credit ratings have been assigned to Simple solutions Leasing company LLC and the bond issues of Simple solutions Leasing company LLC (ISIN RU000A100Q35, RU000A1022E6, RU000A106EР1) 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 Methodology for Assigning Credit Ratings to 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 Simple solutions Leasing company LLC and the bond issues of Simple solutions Leasing company LLC (ISIN RU000A100Q35, RU000A1022E6, RU000A106EР1) were published by ACRA for the first time on November 15, 2019, December 18, 2019, September 9, 2020, and June 26, 2023, respectively. The credit rating of Simple solutions Leasing company LLC and its outlook, as well as the credit ratings of the bond issues of Simple solutions Leasing company LLC (ISIN RU000A100Q35, RU000A1022E6, RU000A106EР1), 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 Simple solutions Leasing company LLC, information from publicly available sources, and ACRA’s own databases. The rating analysis was performed using the consolidated IFRS and RAS financial statements of Simple solutions Leasing company LLC. The credit ratings are solicited and Simple solutions Leasing company LLC participated in their assignment.
In assigning the credit ratings, ACRA used only information, the quality and reliability of which were, in ACRA’s opinion, appropriate and sufficient to apply the methodologies.
ACRA provided additional services to Simple solutions Leasing company LLC. No conflicts of interest were discovered in the course of credit rating assignment.
