JCR Eurasia Rating revised the credit ratings of Baser Faktoring A.Ş. and the Planned Bond Issues in the periodic annual review and assigned ratings of ‘BBB+(Trk)/Stable’ on the Long Term National Scale and affirmed ratings of ‘BBB-/Stable’ on the Long Te

JCR Eurasia Rating revised the credit ratings of “Baser Faktoring A.Ş.” and the Planned Bond Issues on the Long Term National Scale and assigned ratings of ‘BBB+(Trk)’ along with a ‘Stable’ outlook. On the other hand, JCR Eurasia Rating has also affirmed the Long Term International Foreign and Local Currency Ratings as ‘BBB-/Stable’. 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

Long Term Issue Rating

: :

BBB+ (Trk) / (Stable Outlook)

BBB+ (Trk)

Short Term International Foreign Currency

:

A-3 / (Stable Outlook)

Short Term International Local Currency

:

A-3 / (Stable Outlook)

Short Term National Local Rating

Short Term Issue Rating

: :

A-2 (Trk) / (Stable Outlook)

A-2 (Trk)

Sponsor Support

:

3

Stand Alone

:

B

The Factoring Sector exhibits one of the highest levels of vulnerability to fluctuations in macroeconomic circumstances and instability. Management policies in the sector are strongly influenced by the changes in economic outlook and regulatory pressures from the Banking Regulation and Supervision Agency (BRSA). In line with the undertaken reforms, the sector’s legal infrastructure has been improved with regards to effective surveillance and control. As such, the mandatory installation of information, risk measurement and internal control systems made a positive contribution to the improvement of the sector’s institutional set-up, and the quality, standardization and transparency of financial reporting practices and facilitated fair competition.

Having commenced its operations in 1995, Baser Faktoring, the majority shares of which have been acquired by Bica Holding A.Ş., owned by the Baser Family in 2005, has increased its paid capital in line with the legal regulations concerning the factoring sector brought about by the BRSA and maintained the rise in its transactional volume and number of customers in the completed financial year. The Company, which expanded its branch network throughout the country in order to provide rapid responses to micro-loans via the planned SMS factoring project in the completed financial year, was faced with rising operational expenses and non-performing loans which exerted pressure on the profitability performance, leading to the formation of losses at yearend. Additionally, the foreign exchange position stemming from the acquisition of investment property via a long term sell and leaseback financial loan and the FX losses that were formed resulting from the devaluation of the Turkish Lira weakened the Company’s internal equity generation capacity. However, the additional financing expenses formed as a result of the mentioned transaction and its subsequent effects on Company profitability is planned to be relieved by the cash flows that will be generated from the renting of the property in the near-future.

In the 1Q2016, the Company has begun the implementation of a number of structural measures in order to address the losses that took place in FY2015, it recorded a rise in its profitability performance by carrying out technological upgrades to the infrastructure of the Credit Automation System anticipated to improve credit allocation and transaction processes and as such lowered the amount of bad cheques, revised the number of branches in order to reduce operating expenses and increase productivity along with the realized collections from its non-performing loans portfolio via a strengthened legal division. On the other hand, the maintenance of the NPL portfolio in relation to total factoring receivables and equity above sector average levels, the net losses formed at the end of the financial year due to rising level of financing expenses, provisions and operating expenses, the volatility on the future profitability performance stemming from the foreign exchange risk brought about by financial leasing liabilities and the difficulties experienced in expanding market share in the intensely competitive operating environment constitute the major factors in the revision of Baser Faktoring’s Long Term National Rating as “BBB+ (Trk)”. The net interest margin, which maintains its above sector average level despite exhibiting a declining trend, a robust collateral level covering the entire receivables portfolio, a balanced receivables portfolio dispersed across various sectors and corporate and SME customers, funding structure diversified by bond issues, adoption of zero NPL sale policy in accordance with a conservative risk management approach, above sector average level of provisioning, the operationalization of Company strategies focusing on productivity and emphasis on the customer and the re-alignment of operational processes in this context form the major foundations in the affirmation of the outlook attached to the Long and Short-Term Ratings as “Stable”. A separate rating report has not been compiled as the resources obtained from the bond issue will be carried in the Company’s balance sheet and was subject to analysis in the corporate credit rating report. The planned bond issue carries no difference in comparison to the Company’s other liabilities with respect to its legal standing and collateralization, as such the notations outlined in the corporate credit rating report also reflect the issue rating.

It is considered that the major controlling shareholders of the Company, Bica Holding and the majority real person shareholder, Mr. Atilla Başer have the willingness and experience to the ensure the long term liquidity and equity within their financial capability when required and to provide efficient operational support to Baser Faktoring, taking into account its operational track record, attained level of know-how, generated employment opportunities and entailed long term growth potential. As such, the Company's Sponsor Support Grade has been affirmed as (3) in JCR Eurasia Rating’s notation system, denoting an ‘adequate’ level.

On the other hand, taking into consideration the future growth opportunities provided by the Company’s current level of equity, undertaken investments in risk management processes and marketing personnel and the achieved level of progress with respect to transparency and compliance with Corporate Governance Practices, JCR Eurasia Rating has reached the conclusion that the Company has the sufficient financial strength, managerial know how and infrastructure to manage its obligations regardless of any assistance that may be provided by the shareholders as long as the macro-economic conditions are maintained in line with market expectations. In this regard, the Stand Alone grade of the Company has been determined as (B) in the JCR Eurasia Rating notation system, denoting an ‘adequate’ level.

For more information regarding the rating results, you may visit our internet site http://www.jcrer.com.tr or contact our analysts Mr. Gökhan İYİGÜN and Mr. Dinçer SEMERCILER.

JCR EURASIA RATING

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