Press Releases / 15.04.2014
Press Release as of 15.04.2014
CJSC AK&M Rating Agency affirmed the national scale reliability rating of TCS-Accounting LLC at 'A+' lifting the outlook from stable to positive.
The 'A+' rating indicates that the limited liability company Trewetch Corporate Services – Accounting maintains a very high level of reliability. Risk of a failure to meet liabilities in full and in time is insignificant.
The rating action reflects the service company's capacity to fully and timely meet its obligations to maintain accounting and tax records of mortgage agents, i.e. special-purpose vehicles set up exclusively to acquire receivables on loans secured by mortgage, to later issue and service mortgage-backed debt securities (MBS).
The higher outlook on TCS-Accounting's rating primarily reflects its significantly higher scale of operations and impressive business expansion. In 2013 alone, the mortgage agents affiliated with the TCS group placed 4 mortgage bond issues, as many as for the whole preceding period of the groups's existence in the mortgage securities market. Also, CJSC Eastern-Siberian mortgage agent 2012 using the rated Company's records management services directly participated in the first ever multi-originator deal in Russia's mortgage securitization market where the agent's bonds were collateralized by the mortgage bonds provided by five mortgage market players including OJSC AHML.
Mortgage agent AHML 2011-1 has placed the third issue of its debt securities, which we regard as a positive rating driver. This, in a way, is a record achievement for the domestic mortgage asset securitization market indicating the domestic mortgage market leader's growing confidence in the Company. The latter is proven by AHML's decision (made in February 2014) to authorize the TCS group as a corporate service provider to accomplish 10 scheduled transactions within the framework of the multi-originator vehicle (MOV) mortgage securitization platform.
The TCS group is constantly increasing the amount of new business (the nominal value of the affiliated mortgage agents' new MBS issues): RUB 2.22 billion in 2009, RUB 3.73 billion in 2011 (increasing 1.7 times), RUB 6.72 billion in 2012 (increasing 3 times), RUB 11.33 billion in 2013 (increasing 5.1 times). While trailing the average market performance (1.9, 3.4 and 6.1 times, respectively), this growth still indicates a positive trend in the Company's business development. As of December 31, 2013, the mortgage agents taking TCS-Accounting's records management services had RUB 21.5 billion in balance sheet assets (3.5 times more than in 2011 and twce above the 2012 level).
The mortgage agents authorizing TCS-Accounting to maintain their accounting records are operating in full compliance with federal laws 152-FZ "On mortgage-backed securities", 39-FZ "On securities market" and other regulatory instruments issued by state administrative and supervisory bodies. Coupon and nominal principal payments on the mortgage bonds are effected in due time (4 times a year) and in full (meeting the terms of bond offering), indicating the rated Company's effective interaction with other parties to mortgage asset securitization deals. The Company's accounting records maintenance services provided to mortgage agents meet the applicable requirements, as proven by the favorable audit opinions of CJSC Intercom-Audit, a member of SRO NP Audit Chamber of Russia, and absence of tax sanctions.
Apart from keeping mortgage agents' accounting records, the Company provides similar services to other corporate customers in various market segments under outsourcing contracts, earning ca. 10% of its total revenues from such services in 2013.
The financial position of TCS-Accounting LLC may be regarded as fairly stable. The Company's debt burden is limited to accounts payable (current payments to employees, taxes, and liabilities to mortgage agents and other customers); as of December 31, 2013, its net debt to revenue ratio was 0.16. The Company's comfortable liquidity position (absolute liquidity ratio: 56%, current liquidity ratio: 89% as of the same date) also contributes to the Company's rating. In a word, the Company's financial position enables it to focus entirely on its core business of providing accounting records maintenance services to mortgage agents.
At the same time, the Company's weaker market position against its sole competitor (RMA-Service LLC) is putting moderate pressure on the Company's rating. As of December 31, 2013, the TCS group accounted for 22.9% of the total number of MBS issues, 9.7% of the total nominal amount (at the moment of placement) of the mortgage bonds issued in the Russian SPV mortgage securitization market. Another issue for the Company is its significantly lower profitability (ROA being 3.3% at the end of 2013 against 35.4% the year before), even though the operating income almost doubled.
TCS-Accounting LLC has been operating in the mortgage securitization market since 2009. Today, the Company provides accounting and tax records maintenance services to the closed joint-stock companies Mortgage Agent of MBRD, Mortgage Agent of AHML 2011-1,Mortgage Agent HFB-1, Mortgage Agent Absolut, Mortgage Agent FORA, Eastern-Siberian mortgage agent 2012, First St. Petersburg Mortgage Agent, FEMLC-1 Mortgage Agent, Mortgage agent Vozrozhdenie 3, Multi-originator Mortgage Agent 1. Besides, the Company provides operations support to five other corporate customers. Investment Company TREWETCH Investments Ltd registered in Cyprus owns 99% of the authorized capital of TCS-Accounting LLC. The Chief Executive Officer of TCS-Accounting LLC is Tatyana Kachalina, an internationally rated corporate law, capital market, project financing, securitization and M&A expert.
This press release is based on the statement of assigning a reliability rating to TCS-Accounting LLC.
CJSC AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.
CJSC AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993.
CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010).
CJSC AK&M Rating Agency
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Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.