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Correction: Fitch Rates New Europlan Opco 'BB-', Withdraws Ratings on Holdco
July 7, 2017 / 9:23 AM / 5 months ago

Correction: Fitch Rates New Europlan Opco 'BB-', Withdraws Ratings on Holdco

(The following statement was released by the rating agency) LONDON, July 07 (Fitch) This commentary replaces the version published on 30 June 2017. It corrects the rating action on the senior unsecured rating of JSC Leasing company Europlan's bonds to affirmation at 'BB-' following the transfer of the notes from PJSC Europlan, and not withdrawn at PJSC Europlan and assigned at opco as stated initially. Fitch Ratings has withdrawn PJSC Europlan's ratings, including its Long-Term Issuer Default Ratings (IDRs) of 'BB-'. Simultaneously, the agency has assigned the newly created JSC Leasing company Europlan (LC Europlan) Long-Term IDRs of 'BB-' with a Stable Outlook. The rating actions follow the completion of the reorganisation of PJSC Europlan. The reorganisation involved the transfer from PJSC Europlan to its new subsidiary LC Europlan of all financial liabilities relating to its leasing business (including outstanding bonds and bank loans) and all of its leasing assets, but only a portion of its cash and liquid assets. Fitch has withdrawn PJSC Europlan's ratings as it has undergone a reorganisation. Accordingly, Fitch will no longer provide ratings or analytical coverage for PJSC Europlan. A full list of rating actions is at the end of this rating action commentary. KEY RATING DRIVERS The asset/liability transfer is the second stage of Europlan's reorganisation, the ultimate purpose of which is to create a holding company for the non-bank financial assets of Safmar Group, which apart from Europlan include a 49% stake in VSK Insurance (BB-/Stable), and a 100% stake in Safmar pension fund. The first stage of the reorganisation was completed in December 2016, when Safmar contributed its stakes in the pension fund and insurance company to PJSC Europlan, which additionally raised RUB15 billion of equity contributed in cash via a secondary public offering. The rating actions reflect Fitch's view that LC Europlan's credit profile does not significantly differ from that of PJSC Europlan before it received stakes in the pension fund and VSK. LC Europlan's management has informed us that there are no plans to change the strategy of the company after the carve-out. The company will continue to focus on retail financial leasing of vehicles. LC Europlan will retain its core management team and existing branding. LC Europlan's 'BB-' Long-Term IDRs and senior debt rating reflect the company's significant franchise in the Russian auto leasing sector, so far conservative management and risk appetite, and sound financial metrics. At the same time, the ratings also reflect the high-risk Russian operating environment and contagion risks resulting from Europlan's shareholder, Safmar Group (previously known as B&N Group). As per preliminary management accounts after the reorganisation, LC Europlan's leverage (defined as debt/equity) has increased to 3.3x compared with 1.5x at PJSC Europlan prior to reorganisation, as a result of PJSC Europlan retaining a sizable part of its cash and liquid assets. However, Fitch views this leverage as consistent with a 'BB-' rating. The senior unsecured notes issued by PJSC Europlan were transferred to LC Europlan's as part of the group reorganisation and have been affirmed at 'BB-'. LC Europlan's senior debt rating is aligned with the company's Local-Currency IDR, reflecting Fitch's view of average recovery prospects for unsecured senior creditors in case of default. This in turn is driven by the moderate proportion of company assets that have been pledged to secured creditors. RATING SENSITIVITIES An upgrade of LC Europlan's IDRs is currently unlikely given the still challenging operating environment and expected further increase in leverage from renewed business growth. The company could be downgraded if its asset quality and performance weaken significantly, to the extent that this results in a marked increase in the company's leverage or compromises the quality of its capital. LC Europlan could be also downgraded if Fitch concludes that its strategy, risk appetite, balance sheet structure and/or financial metrics are likely to significantly weaken following shareholder actions, or if the company become significantly exposed to related parties, non-core assets or other contingent risks arising from the other assets of its owner. The senior debt rating could be downgraded in case of downgrade of the company's Local-Currency IDR, or a marked increase in the proportion of pledged assets, potentially resulting in lower recoveries for unsecured senior creditors in a default scenario. The rating actions are as follows: PJSC Europlan Long-Term Foreign- and Local-Currency IDRs: 'BB-'; withdrawn Short-Term Foreign-Currency IDR: 'B'; withdrawn JSC Leasing company Europlan Long-Term Foreign- and Local-Currency IDRs: assigned at 'BB-'; Outlooks Stable Short-Term Foreign-Currency IDR: assigned at 'B' Senior unsecured debt: affirmed at 'BB-' (transferred from PJSC Europlan) Contacts: Primary Analyst Aslan Tavitov Director +44 20 3530 1788 Fitch Ratings Limited 30 North Colonnade London E14 5GN Secondary Analyst Ruslan Bulatov Associate Director +7 495 956 9982 Committee Chairperson James Watson Managing Director +7 495 956 6657 Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email:; Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: Additional information is available on Applicable Criteria Global Non-Bank Financial Institutions Rating Criteria (pub. 10 Mar 2017) here Additional Disclosures Dodd-Frank Rating Information Disclosure Form here Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. 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