CJSC AK&M Rating Agency affirmed the national scale credit rating assigned to LIKONS LLC at 'A' (tier 1) revising the outlook to positive from stable.

The 'A' rating indicates that the Company if highly creditworthy. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal.

The improved outlook on the leasing company's rating reflects the Company's significant profitability improvements and its ability to maintain the previously achieved balance sheet and operating performance. The strong liquidity position and the comfortable debt load also contribute to the Company's rating.

In 2013, the Company's balance sheet profit totaled RUB 16.8 million exceeding the previous year's result 4.5 times, while net profit increased 1.8 times. This increase was attributable to the Company's efforts to keep its prime cost growth rate commensurate with the changes in sales revenues and a cutback in administrative expenses. As a result, return on sales increased from 13.5% to 19.7%, return on equity grew from 7.4% to 30.9%. The Company went on to improve its financial performance in the first quarter of 2014.

Over the last eighteen months, LIKONS LLC's lease portfolio has held steady at ca. RUB 1.6 billion The lease payments to lease portfolio ratio is fairly high (70% on January 1, 2014 against ca. 58% on average in the market), an evidence of the Company's appreciable operating efficiency.

The debt burden on the lease operator is within acceptable limits and looking down. In particular, the net debt to EBITDA multiple decreased from 1.32x on January 1, 2013 to 0.94x as of April 1, 2014. The latter value meets the most stringent banking covenants with a good margin. The Company's debt liabilities in absolute terms also decreased from RUB 1.176 billion to RUB 1.028 billion for the same period.

The Company's balance sheet asset liquidity is traditionally high. As of April 1, 2014, its absolute liquidity ratio was 2.25x, current liquidity ratio 5.19x. The current assets to loan servicing obligations ratio was ca. 1.1x over the last 12 months.

Aside from the above-mentioned, we appreciate the Company's deliberate efforts to reduce the infrastructure risk by diversifying its business activities, in particular, by adding new business segments to its activity profile (lease of real estate, aircraft (helicopters), temporary (modular) buildings and facilities, etc.). The leasing company prefers customers with steady funding sources, primarily the government (budget) funds.

At the same time, the high concentration of business activities on major customers is still generating risks for the Company's activity. In particular, the strategic lessee accounted for about 25% of the net lease payments as of July 1, 2014, more than half of the total lease portfolio being attributable to the five major customers.

We regard the low capital adequacy level as a negative rating driver. On April 1, 2014, the Company's equity to total assets ratio was a mere 3.8%, way below the average market percentage.

We also note that Russia's weakened economy facing the risk of recession implies a higher probability of cash gaps resulting from potentially growing arrears on lease payments, with some of the customers in jeopardy of full default on their obligations. Should this be the case, the Company's rating may be exposed to strong pressure.

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 2013, LIKONS LLC ranked 77th among the Russian companies in the amount of the lease portfolio, 73th in the amount of new lease contracts, 69th 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 assignment of a credit rating to LIKONS LLC.

The rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's creditworthiness and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.

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.

CJSC Analysis, Consulting and Marketing 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.

CJSC AK&M Rating Agency

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