JCR Eurasia Rating has affirmed the credit ratings of Kredi Finans Faktoring Hizmetleri A.Ş. and the Cash Flows Relating to the Planned Bond Issues as ‘BBB+(Trk)/Stable’ on the Long Term National Scale and ‘BBB-(Trk)’/ Stable’ on the Long Term Internation

JCR Eurasia Rating has evaluated “Kredi Finans Faktoring Hizmetleri A.Ş.” in an investment-grade category on a national and international level and affirmed ratings of ‘BBB+ (Trk)/Stable’ on the Long Term National Scale, ‘BBB-’/Stable on the Long Term International Foreign Currency Scale and ‘A-3/Positive on the Short Term National Scale. Other notes and details of the ratings are given in the table below:

Long Term International Foreign Currency

:

BBB-/ (Stable Outlook)

Long Term International Local Currency

:

BBB-/ (Stable Outlook)

Long Term National Local Rating

:

BBB+ (Trk) /(Stable Outlook)

Short Term International Foreign Currency

:

A-3/ (Stable Outlook)

Short Term International Local Currency

:

A-3/(Stable Outlook)

Short Term National Local Rating

:

A-3 (Trk) / (Positive Outlook)

Sponsor Support

:

2

Stand Alone

:

B

The Turkish Factoring Sector has continued to create value for the commercial activities of the country and national economy by providing alternative funding sources to real sector companies, and to SMEs in particular. Despite the probable adverse effects of volatile market conditions derived from overseas and domestic economic and political developments, the sector maintained its positive outlook due to Turkey’s SME- dominated commercial environment, its ability to adapt rapidly to market conditions via its short-term weighted receivables structure, comparatively low penetration level, strengthened legal framework and improved overall standing and reputation owing to recent regulations and reorganizations for upcoming years, in addition, the sector improved its systemic support level through membership in Takasbank (Istanbul Settlement and Custody Bank) Money Market, creating alternative funding channel for non-banking financial sector companies and through the recently developed cooperation between factoring companies and the Turkish Export Import Bank (Eximbank) providing exporters with cost effective financing opportunity.

Kredi Finans Faktoring Hizmetleri A.Ş., having begun its activities in 1998, rapidly growing company following its acquisition by the Başaran Group in 2010, has closed its two branches due to improvement of financial performance and adopted a profitability focused growth strategy. As of the completed fiscal year the decreasing and below sector average equity level was supported through a cash injection in the second quarter of 2015 and reached TRY 30mn – exceeds minimum capital requirements for factoring companies.

Internal equity generation capacity of the Company, bond issuances diversifying funding sources and relieving liquidity needs, non FX bearing balance sheet structure, strong collateral level, the existence of an experienced management team together with the high probability of the realization of the Company’s growth strategies and expected coverage of internal resources to be generated and projected cash flows regarding debt services were effective in the affirmation of the ratings on the Short and Long Term National scales. The Company's asset quality and profitability ratios were exerted pressure due to high levels of customer concentration, higher than sector averages of NPL level in a fiercely competitive sector dominated by bank.

It is considered that the major controlling real person shareholders Mr. Hüseyin BAŞARAN has the willingness and experience to ensure long term liquidity and equity within their financial capability when required and to provide efficient operational support to Kredi Finans Faktoring Hizmetleri A.Ş. In this regard, the Company's Sponsor Support grade has been determined as (2).

On the other hand, taking into account the Company’s growth rate, asset quality, organizational structure and equity level, we, as JCR Eurasia Rating, are of the opinion that Kredi Finans Faktoring Hizmetleri A.Ş has reached the level of adequate experience and facilities to manage the incurred risks on its balance sheet regardless of any assistance that may be provided by the shareholders, provided that it expands its current customer base, increases its income generation capacity and effectiveness in the market and makes ongoing improvements in infrastructure. Within this context, the Stand Alone grade of the Company has been determined as (B) in the JCR Eurasia Rating notation system.

For more information regarding the rating results you may visit our internet site http://www.jcrer.com.tr or contact our analyst Mr. Orkun İNAN.

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