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Fitch Affirms 2 Tunisian Factoring Companies.

London: Fitch Ratings has affirmed Tunisie Factoring's (TF) National Long-Term Rating at 'BBB(tun)' and upgraded the National Short-Term Rating to 'F2(tun)' from 'F3(tun)'. The Outlook on the Long-Term rating has been revised to Positive from Stable. Union de Factoring's (UF) National Long-Term Rating and National Short-Term Rating have been affirmed at 'BB(tun)' and 'B(tun)', respectively. The Outlook on UF's National Long-term Rating is Stable. A full list of rating actions is at the end of this rating action commentary.

The rating actions follow a periodic review of Tunisian factoring companies' National Ratings. National Ratings reflect the creditworthiness of an issuer relative to the country's best credit and relative to peers operating within that country.


TF's National Ratings are driven by Fitch's opinion of the support that the company could expect to receive, if required, from its 100% shareholder, Tunisie Leasing (TL, BBB+(tun)/Stable/F2(tun)). The revision of the Outlook to Positive reflects the increasingly important and integrated role TF has within the TL group. TL is a leading provider of non-bank financing services in Tunisia. Factoring products are an increasingly strategically important product within the group.

The upgrade of TF's National Short-Term Rating reflects Fitch's view that TF's funding risk profile is now more closely aligned with that of TL following growing evidence of an integrated approach to funding strategies.

TF has maintained stable impairment ratios over recent years and loan loss reserve coverage is high. Client concentration risk is high but mitigated by risk management procedures and an underwriting approach that is fairly conservative, in our view. TF's leverage and capital ratios compare well with other rated Tunisian non-bank financial institution peers and TF complies with regulatory capital adequacy requirements. TF relies on wholesale funding and liquidity is tight, like rated peers. Overall liquidity has been adequately managed. Profitability ratios compare well with the peer group despite a rise in TF's funding costs.

UF's National and Senior Debt Ratings are driven by the company's standalone creditworthiness. Fitch does not factor in any shareholder support in UF's ratings because of the fragmented shareholder base. UF has grown its market share and currently controls around half the Tunisian factoring market (up from 41% at end-2012), reflecting a more dynamic commercial strategy. UF's impaired loans ratios are significantly higher than other rated Tunisian non-bank financial institutions. However, a large proportion of impaired loans relate to pre-2008 legacy exposures, which are 100% reserved. Client concentration risk is material, in common with the factoring sector.

UF's profitability ratios compare favourably with those of TF despite pressure on net interest margins. Capitalisation and leverage ratios are in line with TF and the company meets prudential capital adequacy ratios. We consider UF's liquidity tight, in common with other non-bank financial institutions, due to its reliance on wholesale funding.


TF's National Ratings are mostly sensitive to changes in TL's National Ratings and would benefit from stronger integration with TL. Conversely, any deterioration in TL's National Ratings and TL's propensity to support TF, which Fitch believes is highly unlikely, would be negative for TF's National Ratings.

UF's performance is closely linked to the Tunisian operating environment, which although still troubled, is showing signs of stabilisation. It will be difficult for UF to achieve a significant improvement in its standalone credit profile relative to other Tunisian companies in the foreseeable future given the challenges posed by the operating environment in Tunisia. The potential for the ratings to be upgraded on a standalone basis is therefore limited.

The rating actions are as follows:

Tunisie Factoring

National Long-Term Rating: affirmed at 'BBB(tun)'; Outlook revised to Positive from Stable

National Short-Term Rating: upgraded to 'F2(tun)' from 'F3(tun)'

Union de Factoring

National Long-Term Rating: affirmed at 'BB(tun)'; Outlook Stable

National Short-Term Rating: affirmed at 'B(tun)'

National senior unsecured debt rating: affirmed at 'BB(tun)'
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Publication:Daily the Pak Banker (Lahore, Pakistan)
Date:Mar 1, 2018
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