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I AGREE
25 Sep 2017
First-time ratings
London, 25 September 2017 -- Moody's Investors Service has today assigned a corporate family
rating (CFR) of B3 and an issuer rating of Caa2 to Optima Faktoring A.S.
(Optima). The outlook on these ratings is stable. Furthermore,
Moody's assigned a B3.tr National Scale Issuer Rating.
RATINGS RATIONALE
RATIONALE FOR THE CFR
Moody's says that the B3 CFR reflects Optima's solid profitability,
adequate capital buffers and sufficient liquidity, counterbalanced
by its weak franchise, relatively high risk profile, high
problem loans, and the potential risks stemming from the Turkish
operating environment.
Optima is a mid-sized domestic factoring company, based in
Turkey, with assets of USD46 million at December 2016.
With a return on average assets of 2.6% in 2016, Optima
exhibits a solid level of profitability, although this is potentially
volatile in line with the volatility of assets, which can be built
up or run off quickly, given their short-term nature.
Profitability is driven by relatively high margins, and relatively
low operating expenses and cost of credit.
Moody's views Optima's capital ratios to be adequate,
based on tangible common equity (TCE) of 19% of assets at December
2016. Although this is however lower than Turkish peers,
Moody's does not expect a significant reduction of TCE owing to
aggressive asset growth, given the company's policy of focusing
on higher margins rather than volumes.
Optima's liquidity is sufficient, according to Moody's.
The average maturity of assets is around 3 months, while average
maturity of funding is around 5 months, resulting in a 2-month
positive gap. Furthermore, Moody's estimates that the
company is self-liquidating in about 6 months. Optima's
debt is secured by the dated cheques received by the factoring clients.
Against these positive credit drivers, Moody's views the company's
risk profile as relatively high, constrained by volatile assets,
and still developing corporate governance, risk and liquidity management
frameworks, as well as by reliance on a small number of key managers,
a characteristic inherent to Optima's family ownership. These
factors are partly mitigated by the high diversification of assets across
sectors and borrowers. As a small private company, Optima's
level of information disclosure and frequency of financial reporting remains
limited.
Problem loans were 4.7% of loans and 21% of equity
and loan loss reserves at December 2016, which is weaker than the
average of both factoring companies in Turkey (about 4%) and the
Turkish banking sector (3.1%), despite some sales
of problem loans.
Moody's acknowledges that the factoring industry's asset quality
and profitability are currently improving thanks to the liquidity injected
by Turkey's Credit Guarantee Fund into the small and medium-sized
enterprises that are clients of factoring companies. Nevertheless,
Moody's notes that despite this and the current growth in the Turkish
economy, there are potential downside risks in the Turkish operating
environment. These include a combination of political, security
and geopolitical tensions, volatile currency, high inflation,
fragile investor confidence and rising global interest rates.
RATIONALE FOR THE ISSUER RATING
Moody's has positioned the issuer rating at Caa2, two notches
below the CFR, to reflect the structural subordination of senior
unsecured debt to secured debt, which stands at around two-thirds
of the total amount.
Optima's TL128 million debt at end-2016 is secured by the
dated cheques received by the factoring clients. Optima has recently
received regulatory approval to issue up to TL90 million senior unsecured
debt and has already issued TL24 million of senior unsecured bonds.
According to Moody's, the senior unsecured debt is structurally
subordinated to the majority of Optima's debt, which is secured,
hence the issuer rating two notches below the CFR.
RATIONALE FOR THE OUTLOOK
The stable outlook reflects Moody's expectations that the company's
financials will remain consistent with the assigned ratings for the next
12-18 months.
WHAT COULD CHANGE THE RATING UP/DOWN
Moody's could upgrade Optima's rating if (1) problem loans
decline significantly and (2) risk management becomes more structured
and formalised. Moody's could also upgrade the issuer rating
if secured debt declines to significantly less than two thirds of debt.
Conversely, Moody's could downgrade Optima's rating
if (1) the company is unable to sustain current profitability; (2)
TCE declines below 13% of assets or (3) the liquidity profile deteriorates.
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Finance Companies
published in December 2016. Please see the Rating Methodologies
page on www.moodys.com for a copy of this methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in May 2016 entitled "Mapping National Scale Ratings
from Global Scale Ratings". While NSRs have no inherent absolute
meaning in terms of default risk or expected loss, a historical
probability of default consistent with a given NSR can be inferred from
the GSR to which it maps back at that particular point in time.
For information on the historical default rates associated with different
global scale rating categories over different investment horizons,
please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1060333.
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For ratings issued on a program, series or category/class of debt,
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For provisional ratings, this announcement provides certain regulatory
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rating in a manner that would have affected the rating. For further
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Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Carlo Gori
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Sean Marion
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
No Related Data.
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