JCR Eurasia Rating has evaluated Kredi Finans Faktoring Hizmetleri A.Ş. and downgraded the Long Term National Scale ratings from ‘BBB+(Trk)/Stable’ to ‘BBB(Trk)/Stable’ and affirmed the grade of ‘BBB-/Stable’ on the Long Term International Foreign Currenc

JCR Eurasia Rating has evaluated Kredi Finans Faktoring Hizmetleri A.Ş.’s credit ratings and downgraded the note from BBB+ (Trk)/Stable’ to ‘BBB (Trk)/Stable’ on the Long Term National Scale. The Long Term International Foreign and Local Currency ratings have been affirmed as ‘BBB-/Stable’. Details 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 factoring sector provides liquidity and funding solutions for real sector companies and has become an important stakeholder in the economy. The sector is subject to an increasing number of legal regulations which are expected to contribute to continued growth in the upcoming years. Factoring companies have begun to participate in daily liquidity movements in the Takasbank Money Market and work predominately with companies operating in the real economy. This dependency on real sector companies has led to an exposure to volatility in the political and macroeconomic environment.

‘Kredi Finans Faktoring Hizmetleri A.Ş.’, founded in 1998, grew rapidly following its acquisition by the Basaran Group in 2010. The Company closed two branches and currently continues to operate solely through its headquarters in order to focus on profitability and financial performance. Kredi Finans’s non-performing receivables reached 9% in 2014, a great portion of which were transferred to Huseyin Basaran, the utmost shareholder, in 2015, easing pressure on equity and increasing asset quality. On the other hand, allowances on receivables decreased to below sector averages in 2015, creating vulnerability of equity against bad receivables and loans and negatively affecting asset quality. With a capital injection of TRY 15mn by shareholders in 2015, total paid-in capital increased to TRY 30mn, above the legal requirement of TRY 20mn.

According to the evaluation of 2015 audited financial year-end results, the rise of paid-in capital, diversification of funding tools with bonds, increase in asset quality arising from the transfer of overdue receivables, capital adequacy and experienced management are considered positive indicators for the Company. On the other hand, increasing borrowing in USD terms triggering the threat of currency risk, net loss reported in FYE2015, competitive environment dominated by bank-owned factoring companies and negative macroeconomic projections for 2016 together adversely pressure asset quality, profitability and income generation capacity. Therefore, this adverse pressure on asset quality and negative profitability were key factors behind the downgrade of the Long Term National Local Rating from ‘BBB+ (Trk)/Stable’ to ‘BBB (Trk)/Stable’. On the other hand, planned capital injection in 2016, decrease in operational costs based on centralization and ability to reach low cost financing options via the Group’s resources, Short Term National Rating’s outlook has been determined as ‘positive’.

It is considered that the utmost shareholder Huseyin Basaran has the willingness to ensure financial and operational support to Kredi Finans Faktoring if necessary. In 2015 Mr. Basaran both injected capital into the Company and purchased bad receivables with a price in favor of Kredi Finans Faktoring. Therefore, the Company’s Sponsor Support Grade has been assigned as (2), which indicates an adequate level.

Considering the Company’s organization, potential for growth, and experienced employees, we, as JCR Eurasia Rating, have determined that, despite a had net loss of TRY 4.2mn in 2015, the current customer database, operational structure, strong equity and diminished overdue receivables have a positive effect on revenue generation internally. For this reason, the Company’s Stand Alone Rating has been determined as (B), corresponding to an adequate level of capacity to generate revenue and resources without depending on its shareholders or any other entity.

For more information, related with the rating results you may visit our internet site http://www.jcrer.com.tr or contact our analyst Mr. Utku KARAGÜLLE.

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