OREANDA-NEWS. Fitch Ratings has placed Carcade LLC on Rating Watch Negative (RWN), following its recent announcement that its current owners have agreed to sell the company to the shareholders of B&N Bank. A full list of rating actions follows at the end of this commentary.

KEY RATING DRIVERS
The RWN reflects potential changes in Carcade's strategy, risk appetite, balance sheet structure, financial metrics and possible contingent risks arising from other assets of the new owners, including B&N Bank, following the change in ownership.

Carcade is one of the leading privately-owned leasing companies in Russia, focusing on auto leasing (passenger cars, trucks and light commercial vehicles) to primarily SME customers. Its bigger peer Europlan (BB/RWN) was also recently acquired by the shareholders of B&N Bank (see Fitch Places Europlan on Rating Watch Negative, dated 13 July 2015 on www.fitchratings.com). These acquisitions allow B&N group to become a major player in auto leasing in Russia with about a 25% market share and create opportunities for synergies between the two companies.

Carcade's 'BB-' Long-term Issuer Default Ratings (IDR) and senior debt rating reflect the company's significant franchise, conservative management and risk appetite, sound asset quality (annual final losses below 1% since 2009) and satisfactory capitalisation (net debt-to-equity 5.5x at end-2014). Profitability was moderate (ROAA 2.3%) in 2014 and weakened in 1H15 due to a significant rise in funding costs on the market.

Credit risks are mitigated by liquid collateral and on average 25% down-payments on leased assets. Carcade is predominantly bank-funded, but the company manages refinancing risk by closely matching the maturities of assets and liabilities. FX risk is limited, as virtually all its assets and liabilities are rouble-denominated.

RATING SENSITIVITIES
The ratings could be downgraded if Fitch concludes that the company's strategy, risk appetite balance sheet structure and/or financial metrics are likely to significantly weaken following the ownership change, or if in Fitch's view the company becomes significantly exposed to related parties, non-core assets or other significant contingent risks arising from the other assets of the new owners.

In line with other privately-owned Russian leasing companies, the company could also be downgraded if (i) the weaker operating environment translates into significant deterioration of financial metrics; or (ii) prospects for Russia's economy and economic stability weaken further beyond Fitch's current expectations.

The ratings could be affirmed if Fitch concludes that the change in ownership is broadly neutral for the company's credit profile, the Russian economy performs better than currently expected and Carcade's performance remains sound.

The rating actions are as follows:
Long-term foreign and local currency IDRs: 'BB-', placed on RWN
Short-term foreign-currency IDR: affirmed at 'B'
National Long-term Rating: 'A+(rus)', placed on RWN
Senior unsecured debt: 'BB-'/'A+(rus)', placed on RWN.