Fitch takes action on Tunisian leasing companies
International rating agency Fitch Ratings has assigned a support rating of '5' to General Leasing and Amen Lease and changed the support rating of Arab Tunisian Lease to '5' from '4'. At the same time the agency has affirmed the support rating of '5' assigned to Compagnie Internationale de Leasing and Tunisie Leasing.
Maghreb Rating, Fitch's Tunisian affiliate, has removed from Rating Watch Negative and downgraded the Long- and Short-term National ratings of Amen Lease, Arab Tunisian Lease, Compagnie Internationale de Leasing, General Lease and Tunisie Leasing as follows:
Amen Lease: Long-term National rating downgraded to 'BBB-(tun)' (BBB minus(tun)) from 'BBB(tun)'; Short-term National rating downgraded to 'F3(tun)' from 'F2(tun)' Arab Tunisian Lease: Long-term National rating downgraded to 'BBB+(tun)' from 'A(tun)'; Short-term National rating downgraded to 'F2(tun)' from 'F1(tun)' Compagnie Internationale de Leasing:
Long-term National rating downgraded to 'BBB(tun)' from 'A-(tun)' (A minus(tun)); Short-term National rating downgraded to 'F3(tun)' from 'F2(tun)' General Leasing: Long-term National rating downgraded to 'BBB(tun)' from 'BBB+(tun)'; Short-term National rating downgraded to 'F3(tun)' from 'F2(tun)' Tunisie Leasing: Long-term National rating downgraded to 'BBB+(tun)' from 'A-(tun)' (A minus(tun)); Short-term National rating of 'F2(tun)' is affirmed.
A Negative Outlook has been assigned by Maghreb Rating to all the above Long-term National ratings given that the operating environment for the leasing sector remains tough.
Banks dominate Tunisia's financial sector, with leasing companies providing less than 10 percent of all credit extended in the country and focusing on sectors normally overlooked by banks, such as the SMEs, professional individuals, vehicle and equipment financing, etc.
Operating conditions for Tunisia's SMEs are becoming more difficult and demand for leasing products has declined sharply in recent years given poor economic conditions. All Tunisian leasing companies experienced a decrease in loan demand in 2002 and prospects for 2003 remain unfavorable, despite signs of a temporary recovery in April.
In Fitch's opinion, Tunisia's leasing sector is far more vulnerable than the banking sector to any downturn in the economy. This is due to the small size and high number of the players in the sector, which inevitably increases competition and puts pressure on margins, and their reliance on the wholesale markets for funding.
While the Tunisian authorities have, in the past, been supportive of the country's banking system, their willingness to support the leasing sector remains unknown. In addition, the ownership structure of the bulk of Tunisia's leasing companies is highly fragmented, with no clear, majority institutional shareholders.
For the five leasing companies concerned in this press release, Fitch considers that external support, though possible, cannot be relied upon; thus, '5' Support ratings are considered appropriate.
Maghreb Rating placed the National ratings of the above leasing companies on Rating Watch Negative in March 2003. A review of the sector has now been finalized and conclusions are that, in general, the leasing companies are facing weak demand, continued pressure on asset quality with, in real terms, low reserve levels, tight liquidity, with particularly tough conditions in the local bond markets, and capital adequacy ratios which must be analyzed in conjunction with high levels of impaired lending.
Maghreb Rating has conducted a thorough review of the five companies concerned, comparing their strengths and weaknesses. The Long-term National ratings of all five leasing companies are now in the 'BBB (tun)' range, relative strengths and weaknesses reflected in the notching variations. — (menareport.com)
© 2003 Mena Report (www.menareport.com)