(The following statement was released by the rating agency)
Dec 06 - Fitch Ratings publishes Sogelease Bulgaria’s (Sogelease) Long-term Issuer Default Rating (IDR) of ‘BBB+', with a Stable Outlook, Short-term IDR of ‘F2’ and Support Rating of ‘2’.
Sogelease is the 100%-owned leasing subsidiary of Societe Generale Expressbank (SGE, ‘BBB+'/Stable) in Bulgaria, which in turn is 99.7%-owned by Societe Generale (SG, ‘A+'/Negative).
Sogelease’s ratings are equalised with those of Societe Generale Expressbank (SGE) and are based on potential support from the ultimate parent, SG, if required. Fitch believes that Sogelease, on a standalone basis, is not strategically important to SG given its small size and specific business focus. However, in Fitch’s view, support from SG is probable as Sogelease is an integral part of the financial services that SG provides in Bulgaria through SGE, itself located in Central and Eastern Europe (CEE) which is strategically important for SG, while Sogelease’s operations (including risk management and business development) are tightly controlled by SGE. Furthermore, SG provides 73% of Sogelease’s non-equity funding and has also provided guarantees on the company’s third-party borrowings, which in Fitch’s view also increase the likelihood of support.
Sogelease is medium size leasing company in Bulgaria with a market share of 6.3% at end-Q312 by portfolio of lease receivables (2.9% at end-2010). The company provides mainly financial leasing services. Sogelease’s distribution channels include its own network, SGE’s branches and most importantly a network of equipment and car vendors in the country, which has been developed since 2011. This in turn has driven the strong growth of the company’s portfolio of receivables (53% in 2011 and 23% in Q312) and profitability.
Sogelease’s funding comes from financial institutions, including at end-Q312 73% from SG, 12% from SGE and the balance from a multinational development bank guaranteed by SG. Sogelease currently holds minimal liquid assets on its balance sheet given the predictability of funding maturities and potential support from SG. The equity/assets ratio was a low 4.4% at end-Q312. Sogelease does not plan to distribute dividends in order to support its medium term growth.
Sogelease’s ratings are constrained by Bulgaria’s Country Ceiling of ‘BBB+'. The Long-term IDR could be upgraded by one notch, to ‘A-', or downgraded, in case of the Country Ceiling being raised or lowered. A multi-notch downgrade of SG or a reduced commitment of SG to the CEE region in general or the Bulgarian market in particular, could also result in a downgrade of Sogelease’s ratings.