The ‘A’ rating indicates a high credit standing of the Company. Risk of a delay in meeting liabilities is relatively low, restructuring risk for a loan / part of a loan is minimal.

LIKONS LLC is improving its key balance sheet and performance indicators. Over a medium-term period, even amid the recent economic recession, the company’s revenue was on the rise. The annual revenue growth rates exceeded 30% in 2009-2012 (compared with about 10% in Russia’s leasing sector for the same period). The Company’s assets increased by 63% for the same period reaching RUB 2,012.3 million at the end of the first quarter of 2013 (against RUB 1,692.0 million at the start of the year). For the same period, the Company’s leasing portfolio expanded more than twice (against 1.8 times on average in the market) reaching RUB 2,001.6 million. The revenue to leasing portfolio ratio was 40% in 2013 (against 30% last year) indicating that the Company’s operations are highly efficient. In 2012, the new lease contracts of LIKONS LLC amounted to RUB 1,870 million (+80% year-on-year).

LIKONS LLC is generating hefty financial flows. Net cash flow from current operations exceeded 1 billion rubles in 2011 and 2012, far above the Company’s current loan amortization and interest payment obligations. This indicates a high credit capacity of LIKONS LLC and has a positive impact on the Company’s rating.

The Company’s liquidity grew impressively in 2012 and the first quarter of 2013. As of April 1, 2013, its absolute liquidity ratio was 2.65, current liquidity ratio was 20.78 (against 0.15 and 1.00, respectively, as of the start of 2012).

The rating of LIKONS LLC is also supported by the advanced business process automation based on object-oriented software, and a high-grade risk management system (the leasing payments in arrears account for no more than 0.32% of the leasing portfolio, by an order of magnitude below the average percentage in Russia’s banking sector).

At the same time, we regard the poor equity capital adequacy, moderately growing debt and relatively low profitability as negative drivers for the rating of LIKONS LLC.

While staying within acceptable limits, the Company’s debt burden is increasing. Throughout 2009-2012, its net debt to EBITDA ratio varied from 1.2x to 2.5x, therefore staying within the traditional financial covenant range of the banking sector. The upsurge of debt liabilities in the first quarter of 2013 (by RUB 341.2 million or 29%) was caused by the need for the Company to increase the funding base so as to meet its obligations under new contracts. For this period, the Company concluded new lease contracts in the amount of almost RUB 800 million (compared with ca. RUB 1,900 million for the whole year 2011).

Another negative signal for the Company’s rating is the low and degrading profitability of its operations. In 2009-2012, return on sales decreased from 33.5% to 17.7%, return on equity fell from 8.3% to 7.8%. Both ratios are below the average values in Russia’s leasing sector.

The weak profitability influences the Company’s equity capital changes, the only growth driver being its meager net profit. The growing assets of LIKONS LLC are bringing down its equity to total assets ratio. As of April 1, 2013, this ratio was 2.57%, below the performance of many Russian players in the leasing market.

Further possible risks for LIKONS LLC arise from the uncertainty of the macroeconomic situation, growing competition in the market of leasing services, and high concentration of business activities on large customers. At the end of the first quarter 2013, the largest customer accounted for almost one-third of the leasing portfolio against 20% the year before.

LIKONS LLC has been active in the market of leasing services since 2001 primarily focusing on Moscow and Moscow region. The Company has a firm foothold in the medium-sized segment of Russia’s leasing sector. At the end of 2012, LIKONS LLC ranked 77th among the Russian companies in the amount of the lease portfolio, 65th in the amount of new lease contracts, 65th in lease payments.

The company specializes in the finance lease of automobiles, commercial vehicles, equipment and special machines.

This press release is based on the statement of assigning a credit rating to LIKONS LLC.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company’s credit standing and shall not be considered as advice on the purchase and sale of securities or the provision of loan facilities.

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.

AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993.

AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010).

AK&M Ratings are recognized by the Central Bank of Russia (for providing unsecured lending facilities – Regulation 323-P), Vnesheconombank (for granting subordinated loans) and SME Bank (for its program of lending to SME businesses), RUSNANO (when selecting banks to provide cash and settlement services to project and engineering companies implementing investment projects), the MICEX (for the Corporate Bond Index / MICEX CBI and Municipal Bond Index / MICEX MBI calculation and bond listing purposes). By a resolution of Russia’s Government AK&M Ratings count for the recapitalization of banks. Besides, AK&M Rating Agency is recognized by AHML and accredited by SRO National Securities Market Association.

CJSC Analysis, Consulting and Marketing Rating Agency
ul. Gubkina 3
Moscow, Russia
www.akmrating.ru
Press release by: A.V. Khibukhin
Phone no. (495) 916-70-30, fax no.: (499) 132-69-18