Fitch Takes Rating Actions on Tunisian Leasing Companies

Fri Feb 7, 2014 12:22pm EST

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(The following statement was released by the rating agency) PARIS/LONDON, February 07 (Fitch) Fitch Ratings has upgraded El Wifack Leasing's (EWL) National Long-term Rating to 'BBB-(tun)' from 'BB+(tun)'. The Outlook is Stable. Fitch has also affirmed Arab Tunisian Lease's (ATL) National Ratings and removed them from Rating Watch Negative (RWN). Arab International Lease's (AIL), Attijari Leasing's (AL), Compagnie Internationale de Leasing's (CIL), Hannibal Lease's (HL), Modern Leasing's (ML) and Tunisie Leasing's (TL) National Ratings have also been affirmed. At the same time, Fitch has revised the Outlook on CIL's National Long-term rating to Negative from Stable, and the Outlook on ML's National Long-term rating to Stable from Negative. A full list of rating actions is at the end of this rating action commentary. The rating actions follow a periodic review of Tunisian leasing companies' National Ratings. National Ratings reflect the creditworthiness of an issuer relative to the best credit and to peers in the country. Fitch will shortly publish the main findings of this review in a report "Peer Review: Tunisian Leasing Companies". KEY RATING DRIVERS -NATIONAL RATINGS AND SENIOR DEBT AIL, AL, ATL and ML's National Ratings are support-driven, while CIL, EWL, HL, and TL's are driven by the companies' creditworthiness on a standalone basis. AIL's ratings reflect Fitch's opinion of the support that it could expect to receive, if required, from its main direct shareholder, Banque Tuniso-Koweitienne (BTK), and from its ultimate parent, France's Groupe BPCE (GBPCE, A/Stable/a). AIL is 95%-owned by BTK, which in turn is 60%-owned by GBPCE. Although GBPCE has strong capacity to support AIL (as indicated by its 'a' Viability Rating), Fitch views the probability of such support as moderate given that GBPCE is not a direct majority shareholder as well as AIL's limited strategic importance to GBPCE and weak integration within the French banking group. The Stable Outlook on AIL's National Long-term Rating reflects that on GBPCE's Long-term IDR. ATL's National Ratings reflect Fitch's opinion of the limited probability of support the company is likely to receive from its ultimate shareholder, Jordan-based Arab Bank Plc (AB, BBB-/Negative/bbb-), if needed, through the latter's Tunisian subsidiary, Arab Tunisian Bank (ATB, BB/Negative/b). ATL's capital is 33% held by ATB, which in turn is 64.2%-controlled by AB. Although AB has sufficient capacity to support ATL (as indicated by its 'bbb-' Viability Rating), Fitch believes the probability of support from AB is only limited given that AB is not a direct shareholder and given AB's modest interests in ATL's capital. The Negative Outlook on ATL's National Long-term Rating reflects that on AB's Long-term IDR. ML's ratings reflect Fitch's opinion of the probability of support it is likely to receive from its majority shareholder, Banque de l'Habitat (BH), if required. In Fitch's view, this support could ultimately be provided by the state and flow through BH, given BH's relatively weak creditworthiness on a standalone basis. ML is 57%-owned (directly and indirectly) by BH, which in turn is 57%-controlled by the Tunisian state. The Stable Outlook on ML's National Long-term Rating reflects Fitch's view that it would not necessarily be negatively impacted by a one-notch downgrade of Tunisia's Long-term local currency IDR (BB/Negative). AL's National Ratings reflect Fitch's opinion of the limited probability of support it is likely to receive from its ultimate shareholder, the Moroccan group Attijariwafa Bank (AWB, BB+/Stable/bb-), if needed. AL's capital is 65.2% held by AWB's Tunisian subsidiary, Attijari Bank Tunisie (ABT), which in turn is 54.6%-controlled by the holding company Andalucarthage, which is almost exclusively owned by AWB. Fitch believes there is a high propensity of support for AL from ABT and, ultimately, AWB, if needed. However, the probability of support is limited given AWB's restricted creditworthiness (as indicated by its 'bb-' Viability Rating). Fitch considers that the Moroccan government would provide extraordinary support to AWB if needed, given that it is a domestically systemically important bank. Nevertheless, Fitch believes that cross-border support; i.e. support from the Moroccan government flowing through AWB to AL is uncertain. Therefore, Fitch assesses AWB's capacity to support AL looking at its standalone financial strength. ABT is not rated by Fitch. HL's National Ratings reflect only acceptable capital ratios, despite recent improvements, relative to the average credit quality of its loan portfolio. They also factor in more vulnerable asset quality compared with peers, its limited liquidity given the absence of a bank shareholder compared with peers and pressures on its profitability, which remains lower than peers. The upgrade of EWL's National Ratings reflects its materially improved and sustained profitability, its resilient and relatively low risk profile compared with peers as regards to its asset quality and liquidity, and its adequate level of capital. Fitch views EWL's liquidity management as relatively prudent compared with peers and its liquidity risk as acceptable, given potential ordinary support from its bank shareholder, Societe Tunisienne de Banque. TL's National Ratings reflect its leading position in the Tunisian leasing and factoring markets, diversified business profile, sustained - albeit under pressure - profitability since 2011, overall prudent risk management and adequate asset quality ratios compared with peers, and acceptable capital ratios. CIL's National Ratings reflect its average credit quality, limited liquidity, only acceptable profitability and modest levels of capital ratios compared with peers. Fitch has revised the Outlook on its National Long-term rating to Negative from Stable to reflect the company's deteriorated asset quality, weakened solvency and profitability ratios, and the agency's expectations that these pressures might continue in the near future. RATING SENSITIVITIES -NATIONAL RATINGS AND SENIOR DEBT AIL's National Ratings would benefit from closer integration with GBPCE through increasing integration within BTK. The Tunisian bank mainly controls AIL's commercial strategy, credit, liquidity and interest rate risks through board and senior committees. A decrease in BTK's control of AIL, or if GBPCE materially reduced its interest in BTK, could trigger a downgrade of AIL's National Ratings. The same would apply if GBPCE's Viability Rating was downgraded. A significant increase in ATB's stake in ATL could lead to an upgrade of the company's National Ratings. Conversely, ATL's National Ratings could be downgraded if ATB reduced its ownership in ATL, or if AB materially reduced its interests in ATB (and subsequently in ATL) or if there was a downgrade of AB's ratings. A material deterioration in Fitch's opinion of BH and/or the Tunisian state's ability and/or propensity to support ML, resulting in lower creditworthiness relative to the best credit in the country, could result in a downgrade of ML's ratings. AL's National Ratings could benefit from a significant increase in AWB's stake in the company and closer integration with AWB. Conversely, AL's National Ratings could be downgraded if AWB materially reduced its interests in ABT (and subsequently in AL) or following a significant downgrade of AWB's Viability Rating. The National Ratings of EWL, HL and TL are sensitive to a material deterioration in asset quality, leading to an erosion of capital position. EWL, HL and TL's ratings would also be downgraded if their access to liquidity was constrained, either for bond issuance or bank credit lines. Potential for an upgrade of EWL, HL and TL's ratings is limited as the fragile Tunisian economic environment still weighs on the companies' asset quality and liquidity. However, significant increases in capital ratios and sustained improvements in asset quality could reduce the vulnerability of those entities and could eventually lead to an upgrade. A downgrade of CIL's ratings would result from continuous deterioration in its asset quality, solvency and profitability ratios. KEY RATING DRIVERS AND SENSITIVITIES - SUBORDINATED DEBT (TL, ATL, CIL, AL) TL, ATL, CIL and AL's rated subordinated debt issues are Lower Tier 2 issues. Their ratings reflect the weak recovery prospects an investor could expect on investments in these subordinated debts in the event of default. TL, ATL, CIL and AL's subordinated debt ratings could be sensitive to a downgrade of the respective issuer's Long-term National Rating. The rating actions are as follows: Modern Leasing National Long-term Rating: affirmed at 'BBB(tun)'; Outlook revised to Stable from Negative National Short-term Rating: affirmed at 'F3(tun)' Arab International Lease National Long-term Rating: affirmed at 'AA+(tun)'; Outlook Stable National Short-term Rating: affirmed at 'F1+(tun)' National senior unsecured debt rating: affirmed at 'AA+(tun)' Arab Tunisian Lease National Long-term Rating: affirmed at 'BBB(tun)'; removed from RWN; Outlook Negative National Short-term Rating: affirmed at 'F3(tun)'; removed from RWN National senior unsecured debt rating: affirmed at 'BBB(tun)'; removed from RWN National Subordinated debt rating: affirmed at 'BB(tun)'; removed from RWN Attijari Leasing National Long-term Rating: affirmed at 'BB+(tun)'; Outlook Stable National Short-term Rating: affirmed at 'B(tun)' National senior unsecured debt rating: affirmed at 'BB+(tun)' National subordinated debt rating: affirmed at 'B+(tun)' Tunisie Leasing National Long-term Rating: affirmed at 'BBB+(tun)'; Outlook Stable National Short-term Rating: affirmed at 'F2(tun)' National senior unsecured debt rating: affirmed at 'BBB+(tun)' National subordinated debt rating: affirmed at 'BB+(tun)' Compagnie Internationale de Leasing National Long-term Rating: affirmed at 'BBB-(tun)'; Outlook revised to Negative from Stable National Short-term Rating: affirmed at 'F3(tun)' National senior unsecured debt rating: affirmed at 'BBB-(tun)' National subordinated debt rating: 'affirmed at BB-(tun)' El Wifack Leasing National Long-term Rating: upgraded to 'BBB-(tun)'from 'BB+(tun)'; Outlook Stable National Short-term Rating: upgraded to 'F3(tun)' from 'B(tun)' National senior unsecured debt rating: upgraded to 'BBB-(tun)'from 'BB+(tun)' Hannibal Lease National Long-term Rating: affirmed at 'BB-(tun)'; Outlook Stable National Short-term Rating: affirmed at 'B(tun)' National senior unsecured debt rating: affirmed at 'BB-(tun)' Contact: Primary Analyst Sonia Trabelsi Director +33 1 44 29 91 42 Fitch France S.A.S. 60 Rue de Monceau 75008 Paris Secondary Analyst Solena Gloaguen Director +44 20 3530 1126 Committee Chairperson Francesca Vasciminno Senior Director +39 02 8790 872 25 Media Relations: Hannah Huntly, London, Tel: +44 20 3530 1153, Email: hannah.huntly@fitchratings.com. Additional information is available on www.fitchratings.com. Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 31 January 2014, 'Rating FI Subsidiaries and Holding Companies', dated 10 August 2012, 'Finance and Leasing Companies Criteria' dated 11 December 2012, 'National Scale Ratings', dated 30 October 2013, 'Assessing and Rating Bank Subordinated and Hybrid Securities Criteria', dated 31 January 2014, and 'Recovery Ratings for Financial Institutions', dated 24 September 2013 are available at www.fitchratings.com. Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tun)’ for National ratings in Tunisia. Specific letter grades are not therefore internationally comparable. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Rating FI Subsidiaries and Holding Companies here Finance and Leasing Companies Criteria here National Scale Ratings Criteria here Assessing and Rating Bank Subordinated and Hybrid Securities Criteria here Additional Disclosure Solicitation Status here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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