Fitch Affirms 2 Tunisian Factoring Companies

Wed Feb 12, 2014 12:29pm EST

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(The following statement was released by the rating agency) LONDON/MILAN/PARIS, February 12 (Fitch) Fitch Ratings has affirmed Tunisie Factoring's (TF) National Long-term rating at 'BBB(tun)' and Union de Factoring's (UF) National Long-term rating at 'BB(tun)'. The Outlooks on both National Long-term ratings are Stable. A full list of ratings actions is provided at the end of this rating action commentary. The rating actions follow a periodic review of Tunisian factoring companies' National Ratings. National Ratings reflect the creditworthiness of an issuer relative to the best credit and to peers in the country. KEY RATING DRIVERS - NATIONAL RATINGS AND SENIOR DEBT TF's National ratings reflect Fitch's opinion that there is a limited probability that TF would receive support, if required, from its main direct 57% shareholder, Tunisie Leasing (TL, BBB+(tun)/Stable/F2(tun)). While Fitch considers TF as a strategically important subsidiary for TL, the probability of support being provided is viewed as limited due to TL's moderate ability to support its factoring company if needed. The Stable Outlook is in line with that on TL's National Long-term rating. Despite a deteriorating Tunisian operating environment, TF has maintained sound asset quality ratios. Single debtor concentration risk remains high but is, to some extent, mitigated by TF's adequate risk management procedures and prudent credit risk approach. Fitch considers TF's capital ratios as satisfactory. The company sustained its profitability in 1H13 and Fitch expects it to be able to defend its net interest margins by passing a significant part of its higher funding costs to customers. Liquidity is inherently tight but remains well-managed despite liquidity pressures on the Tunisian financial sector. UF's National and senior debt ratings are driven by the company's standalone creditworthiness. They reflect weaker asset quality than peers, tight liquidity, and weakened profitability. However, the ratings also factor in ordinary liquidity support made available by UF's bank shareholders in case of need and its acceptable capitalisation. Fitch considers UF's liquidity as tight, given its reliance on short-term debt and the absence of contingency funding plans. However, liquidity risk has so far been mitigated by support from its bank shareholders, which directly provided more than half of UF's funding at end-1H13. UF's credit risk has improved since 2009, resulting in lower impaired loans and improved asset quality ratios. However, UF's impaired loans ratios remained weak at end-1H13 due to legacy exposures (the majority of impaired loans dated back to 2008), and coverage ratios were only satisfactory. Concentration risk per obligor remains material, a common feature within the factoring sector. Fitch views UF's capital as only acceptable with a Fitch core capital ratio of 23.7% at end-1H13) given low asset quality and concentration risks. UF's shareholding structure is fragmented and as a result, shareholder support cannot be relied upon, in Fitch's view. The bulk of UF's capital is held directly and indirectly by three domestic banks: Arab Tunisian Bank (ATB, 'BB'/Negative) 22.2%, Banque Nationale Agricole (12.5%) and Amen Bank (9.2%). RATING SENSITIVITIES - NATIONAL RATINGS AND SENIOR DEBT TF's National ratings are mostly sensitive to changes to TL's National Ratings. Nevertheless, they could also suffer from a material deterioration of TL's propensity to support TF, or benefit from a strong increase in TL's stake in TF. UF's National ratings and senior debt ratings could benefit from material improvements in asset quality as well as from improved credit and liquidity risk management. A strong increase in ATB's stake in UF could result in an upgrade of UF's ratings. Downside risk for ratings could result from a material deterioration in asset quality and/or capital ratios. The rating actions are as follows: TF National Long-term rating: affirmed at 'BBB(tun)'; Outlook Stable National Short-term rating: affirmed at 'F3(tun)' UF 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 75 008 Paris Secondary Analyst Solena Gloaguen Director + 44 20 3530 1126 Committee Chairperson Francesca Vasciminno Senior Director + 39 02879087225 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, 'Evaluating Corporate Governance' dated 12 December 2012 and 'National Scale Ratings', dated 30 October 2013 are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria here Finance and Leasing Companies Criteria here National Scale Ratings Criteria here Evaluating Corporate Governance 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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