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Various Rating Actions Taken On Russian Non-Bank Financial Institutions Then Withdrawn On EU Ban

NEW YORK (S&P Global Ratings) March 31, 2022--S&P Global Ratings said today that it has taken various rating actions on four Russian non-bank financial institutions. We lowered the long-term foreign currency issuer credit ratings and maintained the negative CreditWatch placements. Subsequently, we withdrew the ratings on the four non-bank financial institutions.

The entities affected are:

  • Investment Co. Veles Capital LLC (Veles Capital);
  • LLC IC Freedom Finance (Freedom Finance);
  • First Client Bureau NPJSC (FCB); and
  • Credit Union Payment Center.

The downgrade of these financial institutions follows the lowering of our transfer and convertibility (T&C) assessment on Russia to 'CC' from 'CCC-' at the same time as the downgrade of the foreign and local currency sovereign credit ratings on Russia to 'CC' from 'CCC-' (see "Russia Foreign And Local Currency Ratings Lowered To 'CC' On High Vulnerability To Debt Nonpayment, Still On Watch Neg," published March 17, 2022, on RatingsDirect).

We capped the foreign currency ratings on three of the Russian non-bank financial institutions (Veles Capital, Freedom Finance, and FCB) at the level of the T&C assessment on Russia given the numerous currency restrictions that the Central Bank of Russia had imposed.

We believe that these entities can fulfil their Russian ruble-denominated obligations to residents and non-residents. Still, the local currency issuer credit ratings reflect a high level of uncertainty regarding the entities' technical ability and willingness to fulfil their obligations in local currency in full and on time in the future.

The withdrawal of all ratings on these Russian non-bank financial institutions follows the decision of the European Union (EU) on March 15, 2022 to ban the provision of credit ratings to legal persons, entities, or bodies established in Russia and our ensuing announcement that we will withdraw all our outstanding ratings on relevant issuers before April 15, 2022, the deadline imposed by the EU (see "S&P Global Ratings To Withdraw Ratings On Russian Entities," March 21, 2022).

Credit Union Payment Center (RNKO)

RNKO provides money transfer services in about 50 counties, predominantly in Russia and for retail clients, and is a core subsidiary of CFT Group, domiciled in Cyprus. We expect the current foreign currency restrictions would affect some of RNKO's money transfer transaction flows from Russia. However, a substantial portion of transaction flows is outside Russia and is not materially affected so far. The transaction flows outside Russia continue to generate foreign currency revenues. Neither RNKO, nor the wider CFT Group, have debt outstanding, in line with their long-standing financial policy, and both have a substantial cash position in and outside Russia. Furthermore, we understand that the CFT Group is ready to honor any settlement obligations that RNKO may not be able to meet.

Taking into account the nature of RNKO's business model and the mitigating factors above, we believe that--even if the operating environment deteriorates further--it would still be able to settle in full and on time the transactions that it has committed to (including foreign currency-denominated ones). However, since RNKO's transaction flows from Russia represent slightly more than 50% of all transactions, we cap the foreign currency issuer credit rating two notches above the T&C assessment on Russia, i.e. at 'CCC/C'. At the same time, we revised to CreditWatch negative from CreditWatch developing the ratings on CUPS as we do not rule out further restrictions or deterioration of the operating environment.

Related Criteria

Related Research

Ratings List

* * * * * * * * * * * * Credit Union Payment Center * * * * * * * * * * *
Downgraded; CreditWatch Update; Not Rated Action
Final To From

Credit Union Payment Center

Issuer Credit Rating
Foreign Currency NR CCC/Watch Neg/C CCC+/Watch Dev/C
CreditWatch Update; Not Rated Action
Final To From

Credit Union Payment Center

Issuer Credit Rating
Local Currency NR CCC+/Watch Neg/C CCC+/Watch Dev/C
* * * * * * * * * * * * First Client Bureau NPJSC * * * * * * * * * * * *
Downgraded; CreditWatch Update; Not Rated Action
Final To From

First Client Bureau NPJSC

Issuer Credit Rating
Foreign Currency NR CC/Watch Neg/-- CCC-/Watch Neg/--
CreditWatch Update; Not Rated Action

First Client Bureau NPJSC

Issuer Credit Rating
Local Currency NR CCC-/Watch Neg/--
* * * * * * * * * * * * * Freedom Holding Corp. * * * * * * * * * * * * *
Downgraded; CreditWatch Update; Not Rated Action
Final To From

Investment Co. Freedom Finance LLC

Issuer Credit Rating
Foreign Currency NR CC/Watch Neg/C CCC-/Watch Neg/C
CreditWatch Update; Not Rated Action

Investment Co. Freedom Finance LLC

Issuer Credit Rating
Local Currency NR CCC-/Watch Neg/C
* * * * * * * * * * * Investment Co. Veles Capital LLC * * * * * * * * * *
Downgraded; CreditWatch Update; Not Rated Action
Final To From

Investment Co. Veles Capital LLC

Issuer Credit Rating
Foreign Currency NR CC/Watch Neg/C CCC-/Watch Neg/C
CreditWatch Update; Not Rated Action

Investment Co. Veles Capital LLC

Issuer Credit Rating
Local Currency NR CCC-/Watch Neg/C
NR – Not Rated

Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. A description of each of S&P Global Ratings' rating categories is contained in "S&P Global Ratings Definitions" at https://www.standardandpoors.com/en_US/web/guest/article/-/view/sourceId/504352 Complete ratings information is available to subscribers of RatingsDirect at www.capitaliq.com. All ratings affected by this rating action can be found on S&P Global Ratings' public website at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following S&P Global Ratings numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; or Stockholm (46) 8-440-5914

Additional Contact:Financial Institutions EMEA;
Financial_Institutions_EMEA_Mailbox@spglobal.com

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