Fitch Ratings has affirmed Tunisie Factoring’s (TF) National Long-term rating at ‘BBB(tun)’ and Union de Factoring’s (UF) National Long-term rating at ‘BB(tun)’. The Outlooks on both National Long-term ratings are Stable.
The rating actions follow a periodic review of Tunisian factoring companies’ National Ratings. National Ratings reflect the creditworthiness of an issuer relative to the best credit and to peers in the country.
TF’s National ratings reflect Fitch’s opinion that there is a limited probability that TF would receive support, if required, from its main direct 57% shareholder, Tunisie Leasing (TL, BBB+(tun)/Stable/F2(tun). While Fitch considers TF as a strategically important subsidiary for TL, the probability of support being provided is viewed as limited due to TL’s moderate ability to support its factoring company if needed. The Stable Outlook is in line with that on TL’s National Long-term rating.
Despite a deteriorating Tunisian operating environment, TF has maintained sound asset quality ratios. Single debtor concentration risk remains high but is, to some extent, mitigated by TF’s adequate risk management procedures and prudent credit risk approach. Fitch considers TF’s capital ratios as satisfactory.
The company sustained its profitability in 1H13 and Fitch expects it to be able to defend its net interest margins by passing a significant part of its higher funding costs to customers. Liquidity is inherently tight but remains well-managed despite liquidity pressures on the Tunisian financial sector.
UF’s National and senior debt ratings are driven by the company’s standalone creditworthiness. They reflect weaker asset quality than peers, tight liquidity, and weakened profitability. However, the ratings also factor in ordinary liquidity support made available by UF’s bank shareholders in case of need and its acceptable capitalization.
Fitch considers UF’s liquidity as tight, given its reliance on short-term debt and the absence of contingency funding plans. However, liquidity risk has so far been mitigated by support from its bank shareholders, which directly provided more than half of UF’s funding at end-1H13.
UF’s credit risk has improved since 2009, resulting in lower impaired loans and improved asset quality ratios. However, UF’s impaired loans ratios remained weak at end-1H13 due to legacy exposures (the majority of impaired loans dated back to 2008), and coverage ratios were only satisfactory. Concentration risk per obligor remains material, a common feature within the factoring sector.
UF’s shareholding structure is fragmented and as a result, shareholder support cannot be relied upon, in Fitch’s view. The bulk of UF’s capital is held directly and indirectly by three