OREANDA-NEWS. S&P Global Ratings today affirmed its AVERAGE ranking on Unifin Financiera S. A.B. de C. V. SOFOM E. N.R. as a leasing primary servicer. The outlook for the ranking is stable. The financial position is SUFFICIENT.

The overall ranking reflects our AVERAGE management and organization subranking for the company, which is supported by its experienced management team, adequate organizational structure, robust information technology (IT) platform that supports its current and rapidly increasing servicing operations, and comprehensive and well-documented policies and procedures. However, the subranking is constrained by the company's high turnover ratios, the lack of a formal business continuity plan, the lack of continuous audits to the collections area, and the internal control area not reporting directly to top management, which may hinder the area's functions.

The overall ranking is also based on the ABOVE AVERAGE loan administration subranking, which reflects the low nonperforming levels that the portfolio has maintained over the past years, adequate standards for loan boarding and document tracking, more automated payment processing, proficient investor reporting, and enhanced customer service.

Unifin Financiera is a leasing company that has operated in the Mexican market for more than 20 years. The company continues to maintain a solid position within the market. Since 2006, it has outperformed its peers as a proficient originator of securitized transactions backed by its lease receivables.

Since our last review, the company has maintained aggressive portfolio growth in terms of profits and origination. It doubled its outstanding balance in just two years (from approximately 7.5 billion Mexican pesos (MXN) as of March 2014) and experienced a 166% increase in the total number of lease contracts during the same time. It also became a public company in 2015.

To date, the company has issued 12 lease securitizations in the Mexican market aggregating roughly MXN11 billion, and it has acquired a loan facility backed by lease receivables with Scotiabank for MXN2 billion (which was previously MXN1.5 billion). Seven of its securitizations have been fully repaid, and all of Unifin's securitizations have shown solid performance, maintaining their 'mxAAA (sf)' ratings throughout their terms.

Since 2006, the company has offered equipment factoring to its clients, and in 2011, it began offering auto loans. As of March 2016, the leasing portfolio represented around 73.2% of the total portfolio, factoring represented 10.1%, and auto loans and others represented the remaining 16.7%. For this assessment, we focused only on the leasing portfolio, which, as of March 2016, comprised 13,665 contracts representing roughly MXN15.05 billion. The leasing portfolio has continued to show sound performance, with a nonperforming ratio (percentage of contracts more than 90 days delinquent) of 0.6% as of March 2016, which we believe is in line with other servicers with an ABOVE AVERAGE loan administration subranking.

We view the following as strengths:Experienced management team in each area that supports servicing operations. A strengthened organizational structure that promotes better segregation of duties and generates more efficient control over the operations. Robust IT platforms that support the company's actual and continuously growing operations. Comprehensive, well-documented, and easily available policies and procedures. Adequate document tracking practices that ensure the document's safety. Proficient reporting capabilities and capacity to deliver accurate, timely information to investors and related parties. Sound portfolio performance over the past several years, which suggests effective and consistent servicing practices. We view the following as weaknesses:Lack of a formal business continuity plan, which, in our view, could provide better operational guidelines in case of contingency. The internal control area does not report directly to top management. This, in our view, may hinder its level of independency. The collections area has not been audited since our last review. High employee turnover ratios mostly explained by the high turnover rates in the sales force and the increase in staff, which may affect adequate business continuity. The key changes since our last review are:The industry average experience for senior and middle managers dropped to 20 and 14 years, respectively, from 23 and 17, and their average company tenure declined to five and two years, respectively, from eight and six. Strengthened organizational structure, which included increasing employees at the middle management level and adding three new departments (investment relationship, business intelligence, and factoring), new regional offices, and the addition of an asset valuation area. The company has hired three new directors for the business, factoring and IT departments, which, in our view, will enforce the company's growth strategy. Unifin has continuously increased training hours for the collection staff, though we believe there is room for more specific training related to the leasing business, such as taxes, accounting, finance, and collection-related topics, among others. The company is in the process of migrating to a new and more sophisticated in-house-developed IT platform, which was created to make the company's operations more efficient. Also, the Customer Relationship Management platform is being replaced with a new and more capable system. The platform migrations are expected to be complete by the end of November 2016.The company has implemented reference accounts for all of its clients and has automated 85% of the payment reconciliation process. The company states that these actions have reduced the process from two days to 15 minutes and has reduced the amount of loans that are one-to-30 days delinquent. The company has diversified its operations across Mexico. OUTLOOKThe outlook for our ranking is stable. We do not expect to revise our ranking over the next 12 to 18 months.

Unifin has improved its payment processing and reconciliation processes through reference accounts, automation, and with the usage of the electronic record that reports the collection status of each contract. This has resulted in a higher ratio of performing leases; it increased to 51.2% as of March 2016 from 42.8% in December 2014, which is in line with our ABOVE AVERAGE loan/asset administration subranking. However, the overall ranking is constrained by the AVERAGE management and organization subranking, which encompasses the company's weaknesses. A continuous reduction in the employee turnover ratios, an inclusion of a formal business continuity plan, a more independent internal control area, and more frequent audits to the collections area could lead us to raise our overall ranking. In contrast, rapid portfolio growth without the corresponding servicing support could lead us to lower the overall ranking.