Fitch Affirms VTB Leasing at 'BBB'; Outlook Negative
February 11, 2009 "Fitch Ratings"
Fitch Ratings-London/Moscow-11 February 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 the leasing arm of VTB, providing finance leases to large and medium-sized corporations. The company is highly integrated with its parent and very reliant on VTB for funding (representing 55% of liabilities at end-Q308), business origination and infrastructure support.
Until Q308, VTBL was growing rapidly, but future business development is constrained by the difficult external funding environment and restrictions on funding available from VTB, which is capped by banking regulations. The lease book remained highly concentrated by lessee (the top 20 lessees represented 93% of portfolio at end-Q308) and by asset class (75% of portfolio represented leases of rolling stock and airplanes). Asset quality significantly deteriorated in Q308, with leases that are overdue by more than 60 days reaching 3.4% of lease book during the period (end-2007: 0%). Asset quality is expected to deteriorate further due to a worsening operating environment and, accordingly, higher impairment charges will weigh on 2009 performance.
The company is highly leveraged with an equity/assets ratio of just 4.8% at end-Q308; this should improve slightly following a USD50m equity injection to be finalised in Q109.
VTB-Leasing has been fully operational since 2002. At end-2008, its total assets were USD4.3bn (end-2007: USD3.4bn), including a net investment in lease of USD3.1bn (end-2007: USD1.9bn).
The rating actions are as follows:
Long-term foreign and local currency IDRs: affirmed at 'BBB'; Outlook Negative
Short-term foreign and local currency IDRs: affirmed at 'F3'
Senior unsecured debt: affirmed at 'BBB'
Support rating: affirmed at '2'
Company — VTB-Leasing
Full nameVTB Leasing