TRIS Rating Co., Ltd. has assigned the company rating of Ayudhya Development Leasing Co., Ltd. (ADLC) at "BBB+" with "stable" rating outlook. The rating reflects ADLC's strong market position in the industrial machinery and equipment leasing industry, an experienced management team, and the company's low operating costs compared with peers, as well as business and financial support from its major shareholder, Bank of Ayudhya PLC (BAY). However, these strengths are partially offset by customer concentration risk and the relatively weak credit profiles of its target customers compared with customers of commercial banks. The "stable" outlook reflects TRIS Rating's expectation that ADLC's experienced management team will be able to expand its portfolio, continuously generate sufficient yields, and maintain low operating costs. The rating is based on the assumption that BAY will continue to provide both business and financial support to ADLC.
TRIS Rating reported that ADLC is a leading financial leasing company concentrating on industrial machinery and equipment leases. The company was established in 1991 as a joint venture of three financial institutions: BAY, International Finance Corporation (IFC) and Korea Development Leasing Corporation (KDLC) -- the largest leasing company in South Korea. BAY Group's ownership in ADLC increased from initially 40% to currently 76%. As part of the BAY Group, ADLC supports BAY's strategy to be a universal banking. Therefore, TRIS Rating expects that BAY will continue to provide business cooperation and financial support to ADLC. TRIS Rating said that 14 years of ADLC's operation, together with the support of its foreign partners and the extensive experience of its management team, help ADLC to continuously expand its loan portfolio. The company has a proven record of prudently managing its operating costs. During 2000-2003, its ratio of operating expenses to total income was approximately 14.5% compared with 27.8% for its peers.
ADLC's small customer base of around 200 clients exposes the company to customer concentration risk. Most of its customers are small- and medium-sized entities, who may have difficulty obtaining loans from commercial banks because of a lack of strong audited financial statements. The characteristics of the leasing business and ADLC's policies, such as requiring deposits for lease rental, securing buy-back guarantees from suppliers, and assigning payments from lessees' customers, will mitigate potential losses from defaulting accounts to some extent. However, the long period required for the disposition of lease assets and the higher probability of default from customers with sub-prime credit compared with the customer bases of commercial banks may lead to burden some loss provisions and hamper future profitability of ADLC, TRIS Rating said. -- End
Ayudhya Development Leasing Co., Ltd. (ADLC) Company Rating: BBB+ Rating Outlook: Stable
TRIS Rating reported that ADLC is a leading financial leasing company concentrating on industrial machinery and equipment leases. The company was established in 1991 as a joint venture of three financial institutions: BAY, International Finance Corporation (IFC) and Korea Development Leasing Corporation (KDLC) -- the largest leasing company in South Korea. BAY Group's ownership in ADLC increased from initially 40% to currently 76%. As part of the BAY Group, ADLC supports BAY's strategy to be a universal banking. Therefore, TRIS Rating expects that BAY will continue to provide business cooperation and financial support to ADLC. TRIS Rating said that 14 years of ADLC's operation, together with the support of its foreign partners and the extensive experience of its management team, help ADLC to continuously expand its loan portfolio. The company has a proven record of prudently managing its operating costs. During 2000-2003, its ratio of operating expenses to total income was approximately 14.5% compared with 27.8% for its peers.
ADLC's small customer base of around 200 clients exposes the company to customer concentration risk. Most of its customers are small- and medium-sized entities, who may have difficulty obtaining loans from commercial banks because of a lack of strong audited financial statements. The characteristics of the leasing business and ADLC's policies, such as requiring deposits for lease rental, securing buy-back guarantees from suppliers, and assigning payments from lessees' customers, will mitigate potential losses from defaulting accounts to some extent. However, the long period required for the disposition of lease assets and the higher probability of default from customers with sub-prime credit compared with the customer bases of commercial banks may lead to burden some loss provisions and hamper future profitability of ADLC, TRIS Rating said. -- End
Ayudhya Development Leasing Co., Ltd. (ADLC) Company Rating: BBB+ Rating Outlook: Stable