TEXT-Fitch rates Tanner Servicios Financieros notes 'BBB-(exp)'
Feb 25 - Fitch Ratings assigns an expected long-term foreign currency rating of 'BBB-(exp)' to Tanner Servicios Financieros S.A.'s (Tanner) upcoming five-year senior unsecured notes due 2018. KEY RATING DRIVERS The rating assigned to Tanner's new senior notes corresponds to the bank's long-term Issuer Default Rating (IDR) and ranks equal to other senior unsecured debt. The notes will be issued by an amount to be determined (up to US$300 million), and the bulk of the funds will be used to fund the expected growth in assets (20% in 2013), as well as to prepay some domestic debt issuances (mostly USD denominated). Given that Tanner lending activities are carried in local currency, the company will engage proper FX hedge with local counterparties. The proposed issuance will not have a material effect on Tanner's debt service capacity and overall leverage, considering the recent capital increase completed in late 2012 and also, the fact that part of the proceeds will be used to amortize existing debt. Tanner's ratings reflect its solid and stable financial performance throughout the economic cycles, increased income diversification, and the positive long-term perspectives in the different segments where it operates. Credit risk ratios are low and controlled; the company's loan portfolio is relatively short-term (factoring facilities represent around 43% of total loans) and shows no debtor concentrations. Also, even when funding is wholesale and relatively concentrated in nature, it is composed by a healthy mix of bank financing lines and debt capital market issuances. Asset and liability management is prudent in terms of tenors, yields and currency. Tanner's capital position is considered adequate, and debt levels have decreased since 2007. A a recent capital injection will help to fund future expected growth and maintain adequate leverage levels. Tanner's ratings are limited by its relatively small size and relatively narrow business model that results in concentrations on its operations and revenue sources. Also, recent fast growth will require more seasoning of its lending exposures that may result in some asset quality pressures. A more moderate loan growth and the preservation of its historic asset quality trends will bode well for its financial profile. Established in 1993, Tanner is one of the largest non-bank financial institutions in Chile (USD 1,142.9 million in total assets and USD209.7 million in equity as of December 2012) with a market share of around 9% in the factoring industry granted by the financial institutions that compose Chilean association of factoring enterprises (ACHEF). Its loan portfolio is composed mainly of factoring loans (46.9%), car loans (40.5%) and leasing operations (12.6%). Sensitivities The Rating Outlook is Stable. However, a sustained reduction of Tanner's performance and/or unexpected deterioration of its asset quality that dampens the entity's capital position would trigger a negative rating action. Further diversification of its business model that brings diversified income may sustain positive rating actions. Fitch currently rates Tanner as follows: --Long-term IDR 'BBB-'; Stable Outlook --Short-term IDR 'F3'; --Local currency long-term IDR 'BBB-'; Stable Outlook --Local currency short-term IDR 'F3'; --Senior unsecured FC Bonds 'BBB-(exp)' (up to USD 300 million senior notes due 2018). Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and Related Research: --'Global Financial Institutions Rating Criteria', Aug. 15, 2012; --'Finance & Leasing Companies Criteria', Dec. 12, 2011; --'National Ratings Criteria', Jan. 19, 2011; --'Evaluating Corporate Governance', Dec. 13, 2011. Applicable Criteria and Related Research Global Financial Institutions Rating Criteria Finance and Leasing Companies Criteria National Ratings Criteria Evaluating Corporate Governance