November 26, 2009 |
|Fitch Ratings-London/Moscow-25 November 2009: Fitch Ratings has today affirmed Russia-based VTB Leasing's (VTBL) Long-term Issuer Default Ratings (IDR) at 'BBB'. The Outlook is Negative. A list of rating actions is detailed at the end of this announcement. |
The IDRs and Support rating reflect the high probability of support forthcoming, if required, from VTBL's sole shareholder, Russia's VTB Bank (VTB, rated 'BBB'; Negative Outlook).
VTBL is a leasing arm of VTB and is highly integrated within its parent. It is reliant on VTB for funding (representing 59% of liabilities at end-H109), business origination and infrastructure support.
In H109 the company's business stagnated with net investment in lease at USD2.9bn compared to USD3bn at end-2008. The lease book remained highly concentrated by lessee (the top 20 lessees represented 93% of the portfolio at end-H109) and by asset class (77% of the portfolio represented leases of rolling stocks and airplanes). Another source of risk is business originated in Ukraine (23% of the lease portfolio), VTBL's second-largest market after Russia.
Asset quality has significantly deteriorated since Q308, with lease payments overdue by more than 90 days accounting for 6.7% of the lease portfolio at end-H109 (end-2008: 2.2%). Given the significant concentration in the lease portfolio and that most lessees are in arrears on their lease payments, Fitch believes non-performing leases (net investment in lease overdue by more than 90 days) are, therefore, significantly higher than the reported figure. Most of such leases are undergoing restructuring during H209-Q110, while some will be recovered through termination of agreement with sale or re-leasing of equipment.
The company is highly leveraged with an equity/assets ratio of just 3.4% at end-H109. However, the equity/asset ratio should improve to 8.5% at end-2009, given VTB's planned equity injection of up to USD527m by end-2009, planned 19% growth of net investment in lease, and an increase of impairment reserves to around 10% of the lease portfolio (end-H109: 1.8%).
VTB-Leasing has been fully operational since 2002. At end-H109 its total assets were USD3.9bn, which made up 3.4% of VTB group's assets. The company provides services to its customers, located in Russia and CIS through eight regional offices and four foreign subsidiaries.
The rating actions are as follows:
Long-term foreign and local currency IDR affirmed at 'BBB'; Outlook Negative
Senior unsecured debt: Long-term rating affirmed at 'BBB'.
Short-term foreign and local currency IDRs affirmed at 'F3'
Support rating: affirmed at '2'
|Full company name||VTB-Leasing|
|Country of risk||Russia|
|Country of registration||Russia|