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Moody's changes outlook on National Factoring Company's ratings to negative; affirms B3 ratings

July 07, 2015 | Moody's Investors Service

London, 07 July 2015 -- Moody's Investors Service has today changed the outlook on National Factoring Company's B3 long-term local and foreign-currency deposit ratings and its B3 local-currency debt rating to negative from stable. At the same time, Moody's has affirmed these ratings and has also affirmed the company's Not-Prime short-term local and foreign-currency deposit ratings and the b3 baseline credit assessment.


The key driver for changing the outlook to negative is the increasing fragility of National Factoring Company's funding and business profiles,given its high reliance on funding from a related group of companies and particularly from Bank Uralsib (Caa1/Caa1 negative, caa1) whose long-term deposit ratings were recently downgraded.

Funding from Bank Uralsib and related companies accounted for about 46% of National Factoring Company's non-equity funding, or about 37% of its total assets as of year-end 2014. Therefore, given the limited funding alternatives, the ability to roll over this funding is very important for National Factoring Company's business and liquidity profiles. Although we believe the willingness of Bank Uralsib and related companies to provide such funding remains high, our recent downgrade of Bank Uralsib's ratings means a weakened credit profile of the major fund provider, and therefore, increasing refinancing risk for National Factoring Company.

Despite its high reliance on others for much of its funding, Moody's notes the liquid nature of National Factoring Company's assets, with the majority of exposures being factoring advances that are very short-term. This should enable National Factoring Company to accumulate sufficient liquidity in case it fails to secure non-equity funding. Despite that, the likelihood of a scenario where the company is not able to refinance most of its non-equity funding has now increased. This potential scenario
would mean rapid deleveraging for the company and substantial challenges for its business profile that might lead to loss-making operations and capital erosion. The risk of such a scenario is now reflected in the outlook on National Factoring Company long-term ratings.

The affirmation of National Factoring Company's ratings reflects its strong reported capital adequacy, with an 18.5% equity-to-assets ratio as of year-end 2014, weak but stable earnings and its relatively conservative appetite for credit risk as reflected in its historically low level of non-performing loans (NPLs). In 2014, the volume of NPLs increased by 2.5% and credit costs totalled 1.4% of average gross loans and factoring advances.


An upgrade of the ratings is unlikely in the next 12 to 18 months as reflected in the negative outlook. National Factoring Company's ratings could be downgraded if the company fails to roll over its funding and/or were funding and credit costs to increase, i.e. negatively affecting earnings and capital base.

Company: NFC JSC

Full company nameNational Factoring Company (Joint-Stock Company)
Country of riskRussia
Country of registrationRussia


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