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Georgian TBC Leasing's secured debt rating equalizes with its Long-Term IDR

Business Materials 10 April 2021 11:07 (UTC +04:00)
Georgian TBC Leasing's secured debt rating equalizes with its Long-Term IDR

BAKU, Azerbaijan, Apr.10

By Tamilla Mammadova – Trend:

Fitch Ratings has revised Georgian JSC TBC Leasing's (TBCL) Outlook to 'stable' from 'negative', while affirming the company's Long-Term Issuer Default Rating (IDR) at 'BB-' and Support Rating (SR) at '3', Trend reports via Fitch.

The rating action follows the recent revision of the Outlook on TBCL's parent, TBC Bank, to 'stable' from 'negative'. The Outlook change in TBC Bank reflects lower pressure from the COVID-19 pandemic and also the stabilization of the Georgian economy, which benefits the bank's credit profile and its ability to support TBCL.

TBCL's IDRs are driven by support from TBC Bank (BB-/Stable). Fitch's view of a high probability of support is based on high reputational implications of a subsidiary default for TBC Bank, as this would significantly damage its reputation with its key wholesale lenders, undermining its current strategic focus and growth potential.

Fitch's view is also underpinned by full ownership by, close integration with and a record of capital and funding support from TBC Bank. To support TBCL's growth, the parent has injected new equity on several occasions (most recently in December 2019) and has already approved additional available capital of 2.5 million lari, to be disbursed based on TBCL's needs.

"It also facilitates TBCL's bond placements. TBCL operates solely in Georgia, its domestic market, and is the market leader in Georgian leasing. The company mainly provides financial leasing to the corporate clientele of TBC Bank as well as to SMEs, microbusinesses and individuals," the report said.

TBCL's clients are often higher-risk than those of TBC Bank, but this is partly mitigated by access to liquid collateral and from the adequate pricing of risk. TBCL aligns its strategy and risk policies with those of the parent, although TBCL's management is independent in their operational decisions.

TBCL's standalone credit profile does not drive the IDR as it is constrained by a monoline business model, weak asset quality, high risk appetite, and tolerance for high leverage. Positively, TBCL's profitability is a strength, being above TBC Bank's target and highlighting TBCL's positive contribution to the parent's performance.

TBCL's senior secured debt rating is equalized with the company's Long-Term IDR, notwithstanding the bond's secured nature and an outstanding buffer of contractually subordinated debt. This reflects high uncertainty on asset recoveries in the event of both TBCL and TBC Bank being in default, a scenario that would likely be accompanied by considerable macroeconomic stress in the country.

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