The 'B+' rating indicates that state unitary enterprise Crimean Guarantee Fund of Business Support qualifies as a guarantee institution with a satisfactory degree of reliability. The full or partial default risk is low. The rating assignment was based on the Credit Rating Methodology for Guarantee Institutions rev. March 3, 2015.

State unitary enterprise Crimean Guarantee Fund of Business Support is an element of the regional SME assistance infrastructure in the Republic of Crimea. The Fund was established subject to order 506-r of the Republic of Crimea Baltic Council of Ministers as of June 10, 2014. Its mission is to ensure access of SME businesses to loans and other financial resources, development of a system of guarantees and sureties for the obligations of SME businesses based on credit agreements, loan agreements, finance lease agreements, bank guarantee agreements etc. The first surety was provided by the Fund on November 24, 2014.

The credit rating is essentially supported by the Fund's growing capitalization, business expansion and profitable operations.

This year, the Fund's capitalization is on a positive trend: as of October 1, 2015, state unitary enterprise Crimean Guarantee Fund of Business Support received RUB 2.7 million in subsidies; on October 20, 2015, the Fund additionally received RUB 51,300 from the budget. Therefore, its capitalization increased more than twice.

In October and November, the guarantee institution concluded 7 surety contracts for a total amount of RUB 34.9 million, which enabled businesses to borrow RUB 129.5 million from partner banks. This result already exceeds the performance achieved in the previous quarters.

State unitary enterprise Crimean Guarantee Fund of Business Support is operating at a profit, which contributes to its rating. The Fund's total incomes earned for the 9-month period in 2015 exceeded its total expenses by RUB 78 thousand.

In AK&M Rating Agency's view, the rating is constrained by poorly structured guarantee coverage, high concentration of sureties on biggest partners, and weak diversification of the surety portfolio in terms of loan amounts.

We regard the Fund's policy of investing in counterparty banks as fairly risky, given the weak diversification of deposits and the choice of banks rated below 'A+' according to the AK&M Rating Scale or not currently rated at all. While state unitary enterprise Crimean Guarantee Fund of Business Support observes the limit of deposits with banks (no more than 50% of the total capital intended for providing sureties), the guarantee institution could minimize risks related to the possible loss of money funds, with greater diversification.

The high concentration of sureties on partner banks exerts pressure on the rating. At the moment, 3 credit institutions are financial partners of the Fund. More than half of the sureties (55%) were provided for loans of Russian National Commercial Bank. The lame lending policy of two other banks substantially increases the probability of seeing the Fund forced to discharge its obligations arising from the guarantees provided. It should however be noted that the Fund has so far not discharged payment obligations arising from the surety agreements.

We believe that the Fund's portfolio of sureties is under-diversified in terms of loan amounts. Two biggest sureties account for 30% of the current portfolio, 20% of the guarantee capital, one of these borrowers, in AK&M Rating Agency's view, having a low degree of solvency. The high concentration on large sureties poses greater risks as to the total amount payable on demand of credit institutions, which is a negative signal for the rating.

Full Fund name: state unitary enterprise Crimean Guarantee Fund of Business Support.

Short Fund name: SUE Crimean Guarantee Fund of Business Support.

SUE Crimean Guarantee Fund of Business Support was registered on August 13, 2014. The Ministry of Economic Development of the Republic of Crimea exercises the powers of the owner of property of the state unitary enterprise. For the whole period of activity, the guarantee institution has concluded 38 surety agreements for a total amount of RUB 86.2 million, which enabled small and medium-sized businesses to borrow RUB 261.5 million in loans.

AK&M Rating Agency has assigned a reliability rating to state unitary enterprise Crimean Guarantee Fund of Business Support for the first time. All rating action announcements are available on the akmrating.ru website.

The rating is valid until December 2016. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the guarantee institution's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the guarantee institution. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.

AK&M Rating Agency has assigned a reliability rating to state unitary enterprise Crimean Guarantee Fund of Business Support for the first time. All rating action announcements are available on the akmrating.ru website.

The rating is valid until December 2016. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the guarantee institution's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the guarantee institution. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.

This press release is based on the Statement of assignment of a credit rating to state unitary enterprise Crimean Guarantee Fund of Business Support. The rating assignment was based on the Credit Rating Methodology for Guarantee Institutions rev. March 3, 2015.

The rating, along with any information and conclusions provided in this report, only conveys our opinion and shall not be construed as a recommendation to lend money resources to the Fund or to seek its guarantees and sureties.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

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) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.

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