Capital Intelligence affirms International Finance Company ratings

A 'Negative' outlook is however assigned to reflect the challenging operating environment.

This secured bond maturing in May 2010 has a robust security position which is supported by a replenishable pool of financing contracts.

Any receivable repayments or financing receivables becoming past due are replaced by other financing receivables from a relatively large book of unencumbered financing receivables.

Management has indicated the repayment of the KD5m fixed rate tranche of the bond on maturity while the KD10m floating rate tranche is to be refinanced.

As to the latter, the company has more than sufficient unencumbered assets to aid this refinancing plan.

IFC recorded a loss in 2008 and again in Q1 2009, offsetting the increase in capital in 2008 in view of the difficult equities market and the subsequent revaluation losses of its investment portfolio.

NPFRs showed increases in both 2008 and Q1 2009 while the level of provision coverage fell. The latter was however due to a one-off reversal of surplus general provisioning. With the bond becoming a current liability, the maturity profile of IFC's funding base has also shortened significantly.

Whilst key liquidity measures have also tightened considerably, this is offset by the relatively high portion of financing receivables due in less than one year and to some extent by the underlying liquidity of the investments available for sale Offsetting these negatives are the company's well established position in consumer vehicle finance in the Kuwaiti market and a steady revenue base from this mature business, although margins have been under pressure due to lower interest rates and stricter regulatory controls over both rates charged and ancillary fee and commission income.

The company's relatively low leverage should continue to improve with the concentration on debt repayments and with no new borrowings anticipated in 2009.

IFC was incorporated in Kuwait on 15 April 1980 and has a single main area of activity -- consumer finance, particularly auto loans. IFC's management intends to broaden its area of activity as well as to expand geographically when economic situations improve globally. Whilst being a well established company, IFC however remains a mid-size player in the consumer finance sector in Kuwait.