May 2, 2013 / 8:13 AM / 6 years ago

RPT-Fitch Upgrades Turkey's Lider Faktoring to 'A(tur)'; Outlook Stable

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May 2 (Reuters) - (The following statement was released by the rating agency)

Fitch Ratings has upgraded Lider Faktoring Hizmetleri A.S.’s (Lider) National Long-term rating to ‘A(tur)’ from ‘BBB+(tur)’. The Outlook on the rating is Stable.


The upgrade is driven by (i) a recalibration of the Turkish national rating scale; and (ii) a reassessment of Lider’s standalone credit strength. Each of these factors contributed one notch to the two-notch upgrade.

The reassessment of Lider’s standalone strength reflects the company’s extended track record of sound performance, characterised by good profitability and reasonable asset quality. The rating is also supported by the company’s solid capital ratio, reasonably diversified funding and consistently positive asset/liability maturity gaps.

At the same time, the rating also reflects the company’s limited size within the financial system; the business focus on SMEs, which are vulnerable to economic cycles; potential volatility in balance sheet ratios given the generally short-term nature of assets and liabilities; and some uncertainty about the long-term sustainability of the franchise, given competition from bank-owned factoring companies with cheaper funding, more captive clients and broader product offerings.

The company focuses on financing manufacturing companies, particularly SMEs that produce intermediary goods for larger manufacturers in Turkey. Lider has an established customer network, providing at present a moderately stable base from which to originate business. Receivables are well diversified by seller, buyer, industrial sector and geography.


Lider’s National Long-term rating could be upgraded further if the company is able to broadly maintain its current sound financial metrics as it continues to grow in an increasingly competitive factoring industry. The rating could be downgraded if the company mismanages future growth, resulting in significantly higher balance sheet leverage, weaker asset quality or a less favourable asset/liability maturity profile.

Lider was the largest independent factoring company in Turkey in 2012 and the seventh-largest company overall (including banks and bank-owned companies) based on factoring turnover. Credit Suisse Investments (Netherlands) B.V. of Credit Suisse Group AG (‘A’/Stable) has been a long-term funding provider and is also a minority shareholder with a 9.9% share since 2008.

Factoring companies in Turkey offer receivables collection and cash management services to companies in return for trade receivables, which are mostly in the form of post-dated company cheques or invoices. The self-liquidating asset backed business model provides factoring companies some flexibility to adapt to changing funding conditions in times of stress, but an extended period of difficulty in the economy would put pressure on asset quality and profitability. All of Lider’s factoring transaction turnover in 2012 was made up of domestic factoring transactions.

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