The Expert RA rating agency confirmed the credit rating of the LocoTech-Leasing leasing company at ruBB+. The stable forecast maintained for rating. 

The rating is due to limited market positions, acceptable capital availability and operations performance, adequate liquidity position and the quality of the leasing portfolio, as well as by the conservative level of corporate governance. The agency notes a high probability of support from the key owner due to the importance of the company in the supply chain of LocoTech financial and industrial group, which is considered in the current rating. 

LocoTech-Leasing LLC is a specialized company for providing operational and financial leasing of traction rolling stock and specialized equipment for the railway segment (about 56% and 44% of the portfolio as of 01.04.2019, respectively). The company is represented by a single office in Moscow, the regional network of offices is absent. Participants of LocoTech-Leasing are LocoTech-Service LLC - 74.9% and PJSC TransFin-M - 25.1%, the largest ultimate beneficiaries are Iskander Makhmudov and Andrey Bokarev. 

Limited market position are due to small scale business in the Russian leasing market (the company is at the 46th place in the ranking of Expert RA as of the end of 2018 by the size of the leasing portfolio, and at the 56th place in terms of leasing payments received). In the railway equipment leasing segment the company occupies a satisfactory position (22th place by the scope of new business as of the end of 2018), however, for the 01.04.2018-01.04.2019 period portfolio scope decreased by almost 30% due to the leased property sale. Apart from the narrow specialization of the company in the railway equipment leasing the company market position is constrained by limited customer base (5 lessees), while the largest lessee is the Russian Railways, and the remaining portion of the portfolio is represented by LocoTech group of companies. 

Acceptable capital availability combined with high performance. Equity independence ratio is high (about 17% as per RAS as of 01.04.2019), but the equity capital structure is not optimal equity (88% of capital are retained profit). Operations of the company is characterized by high profitability (as per RAS in 01.04.2018-01.04.2019 average ROA = 5.5%, ROE = 37%). Nevertheless, the Agency notes that at the end of 2018 the company held a single transaction for the sale of leased assets of Russian Railways, which had a significant positive, but a one-time effect on the financial results.

Adequate quality of the leasing portfolio. The leasing portfolio of the company is characterized by the absence of overdue arrears due to transactions with group companies and a high concentration on the Russian Railways (45% of the portfolio as of 01.07.19). At the same time, the agency notes decline in the share of Russian Railways in the leasing portfolio from 84% to 49.5% over 01.04.2018-01.04.2019 due to the repurchase of the leased property by the lessee. A positive impact on the rating is provided by a high level of the leased property insurance (100% of the property insured by insurance companies with a rating of reliability at the level of BBB+ or higher by Expert RA).

Adequate liquidity position. The main source of funding is the subleasing agreement signed with one of the owners of the company (55% of liabilities as of 01.04.2019). The funds raised from banks as of 01.04.19, make up only 7% of liabilities, however the company has an unused limit within a credit line of 1 billion rubles, due to which the new deals may be financed. The agency has also positively assessed the high probability of raising the company's liquidity in case of need from the parent structure that supports the rating. 

Corporate governance is estimated conservatively. The agency notes the non-compliance of the risk management system arrangement level with the best practices and its dependence on the parent group: the structure of the company has not allocated a separate unit for risk management, and the decisions are made at the group level. In addition, the agency estimates the level of transparency as weak: the company has no separate web-site, there is no publicly available financial statement. The agency also notes that the company did not prepare its financial statements in accordance with IFRS. The agency also notes the lack of documents that define the medium and long-term strategic development priorities. However, existing plans to diversify its customer base, according to the agency, can help to strengthen the company's competitive advantages in the Russian leasing market. 

The volume of the portfolio as of 01.04.2019 amounted to 3.3 billion rubles, the volume of new business for the I quarter 2019 -. 647 million rubles, the amount of payments received by the leasing and rental in the I quarter of 2019 - 150 million rubles.