BRIC Panel Russia. Oleg Serg Kiselev CEO Novosibirsk Leasing Company

Transcription

1 BRIC Panel Russia Oleg Serg Kiselev CEO Novosibirsk Leasing Company

2 Russia is northern country

3 General Info Population, total (millions) Population growth (annual %) -0.5 GDP (current US$) (billions) GDP growth (annual %) 6.4 Inflation, consumer prices (ann.%) 12.7 Foreign direct investment,(% of GDP) 2.0 Time required to start a business (days) 33 Internet users (per 1,000 people) 152 Source: World Bank (2006)

4 Basic Russian Leasing Legal Acts The current legal and regulatory base for leasing in Russia is reasonably well developed with technical support of IFC on The primary documents regulating leasing include: The Russian Civil Code, The Federal Law On Leasing The UNIDROIT Convention on international financial leasing. Chapter 25 of the Tax Code. This chapter regulates corporate profit tax and maintains a favorable regime for taxation and, as a result, the economic advantage of leasing deals.

5 Two Main Differences Leasing refers only to financial or capital leasing. Operational leasing simply considered rental. The Russian Civil Code defines certain criteria for a leasing deal. Lease agreements which do not meet these criteria are not considered leases, although they may considered as rent agreements.

6 TAXATION Adoption of the Tax Code on January 2002: Reduction of the VAT tax rate from 20% to 18% Reduction of the profit tax rate from 35% to 24% The following advantages of leasing were confirmed in the Tax Code : The right to choose how to account for the leased asset (on the balance sheet of the lessor or lessee). The lessee s right to expense leasing payment in full. Accelerated depreciation for up to three times.

7 Credit Infrastructure Existence of Credit Bureaus Only for banks Not all companies publish financial information. IAS-accounting is not popular. Leasing companies are experiencing shortage of funds, as a result liquidity crisis in the bank system.

8 Repossession Mechanism Court procedure exist in the Arbitration Litigation Code it takes about 3 months Court procedures lengthy and costly Therefore, lessor must keep the risk of default extremely low.

9 The Licensing and Regulatory Environment 1) Antimonopoly Committee 2) Anti- Money Laundering Federal Service 3) Tax Inspection No licenses for leasing business No regulations for the leasing companies compared to banks

10 BRIC Panel Brazil Alex Lima Latin America Marketing Manager Caterpillar Financial Services

11 General Info Area : Brazil 3,286,482 Sq. Mi % of USA: 93% in area GDP : GDP (PPP) USD Billion % of USA: 12%GP Leasing - Brazil New Biz: USD 10 Billion (mid 2007) Cat Financial Brazil Started Operations in 1997 Captive Financing

12 Start Up Opening a Leasing Company in Brazil Regulated by the Central Bank Separate entity (Lease Company) Part of a Bank (Multiple Bank structure) Must Obtain a Central Bank License Non-Financial institutions cannot offer leases Neither Operating or Finance leases Several regulation and demands from the leasing company

13 Legal Infrastructure The legal system: Legal system is enforced.. However, it is very slow. The Lease concept is formally regulated for approximately 40 years.. However, there is still confusion on its interpretation Operating Leases where regulated in Mid 1990 s Due to the issues in interpretation most of the decisions are favorable to the Lessee

14 Credit Infrastructure Existence of Credit Bureaus Only past Due history and major public data Central Bank information system Information on credit history with Financial Institutions Not all company publish financial information Very informal - Small and mid-size

15 Security Filing and Repossession Security Filing No Centralized System Security Filing: Costly in some regions, it is done regionally. Suggested to be done at the lessor and lessee domicile. Protect against third parties. Repossession Legal action and slow to obtain a mandate to repossess a leased good. Hard to collect future lease payments, even in the case the good is damaged.

16 Tax Environment Lessor Point of View Accelerated Depreciation (within rules) Both Operating and Finance Leases Lessee Point of View Varies on the tax structure and reporting demands Small and Mid-Size companies / Limited Liability Companies Most do not benefit from lease structure Large Companies Incorporated and Regulated by CVM ( SEC ) Leases vs Loans» Will be benefited by lease advantages Leases are purely off balance sheet Loans (Depreciation + Interest Expenses) Different taxes IOF (Financing) x ISS (Services)

17 Profit Repatriation Dividends Profit distribution, after tax No withholding taxes Revenues over Registered Equity Depending on the TJLP (Long term interest rate) Considered as a financial expense Withholding taxes of 15%

18 The BRIC Economic Promise: Brazil, Russia, India & China Development of Equipment Leasing and Finance Markets in the BRIC Countries

19 BRIC Panel Moderator: Presenters: John Sabroske, Director, Global Trade Finance, John Deere Credit Philip Schultz (China), SVP, Business Development & Strategic Planning, Key Equipment Finance Louis Vigliotti (India), Managing Director, GE Commercial Finance Oleg Serg Kiselev (Russia), CEO, Novosibirsk Leasing Alex Lima (Brazil), Latin American Marketing Manager, Caterpillar Financial Services

20 Objectives of this session Gain increased understanding of the opportunities and risks of equipment leasing and financial business in the BRIC countries by examining: The legal infrastructure The credit infrastructure Reliability of secured transactions Tax environment

21 Objectives (continued) Issues in repatriating profits Licensing/regulatory environment Issues regarding transparency and corruption

22 Here come the BRICS

23 The BRIC Economic Promise - India Presentation to ELFA October 30, 2007 Lou Vigliotti Managing Director GE Capital Markets, Inc.

24 Six best-in-class businesses GE Company Overview Global Corporation, AAA rated US$163.4 Bn revenue and US$20.7 Bn net income in 2006 America s most admired company Fortune 6 businesses that operate in 100+ countries and 300,000 employees GE Industrial Provides leasing and asset management services for commercial and transportation equipment, manufactures appliances, lighting and electrical equipment, and provides high performance material solutions that fuel innovation, help customers address unsolved problems and increase manufacturing productivity. GE Infrastructure Provides a comprehensive range of solutions for oil and gas, traditional and renewable power generation and energy management as well as a wide range of powerful and efficient products and reliable services that span the aviation, rail, marine and off-highway industries.. GE Healthcare Through expertise in medical imaging and information technologies, medical diagnostics, patient monitoring systems, disease research, drug discovery systems and biopharmaceuticals, GE is dedicated to detecting disease earlier and tailoring treatment for individual patients GE Consumer Finance A leading provider of credit services to consumers, retailers and auto dealers worldwide GE Commercial Finance GE Commercial Finance offers an array of financial services worldwide. With a particular expertise in the midmarket segment, GE Commercial Financial provides loans, operating leases, financing programs and other services. NBC Universal NBC Universal is one of the world s leading media and entertainment companies in the development, production and marketing of entertainment, news and information to a global audience

25 GE Commercial Finance Businesses Corporate Financial Services Corporate Financial Services is a worldwide provider of innovative financing solutions primarily for non-investment grade companies. Products and services include revolving credit facilities; term debt; asset securitization; trade finance; factoring; debtor-in-possession facilities; plan of reorganization facilities, and preferred and common equity. Capital Solutions Capital Solutions provides a wide variety of operating and capital leases, loans, vendor and tax-exempt financing and small business lending. Financing transactions range from $5,000 to $50 million and involve a variety of lease and loan products tailored to a customer's specific needs on a global basis with headquarters in Connecticut, London and Tokyo. Real Estate Real estate owners and investors worldwide rely on Real Estate for a broad spectrum of financing, equity and servicing solutions, including: intermediate to long-term mortgage financing; restructuring and acquisition capital; niche equity investments/joint ventures; capital market securitization and placements; and asset management services. Healthcare Financial Services Healthcare Financial Services (HFS) focuses exclusively on the special needs of the healthcare industry, bringing a comprehensive set of financial products and services to the market. HFS provides a wide range of financial solutions including working capital lines of credit, real estate financing, equipment rentals/leasing/financing, and private equity investments to healthcare companies of all sizes across a wide range of sectors.

26 GE Commercial Finance - India Entered India: 1993 Employees: 400+ Customers: >12,000 Annual origination volume: > $2.5 B Annual syndication volume: > $600 MM NEA s: Products: Currency: $1.6B Plant & Machinery; Commercial Vehicles; Construction Equipment, Cash flow backed transactions, Sponsor Finance & Infrastructure Rupee funding, no USD

27 Licensing Set up as a Non Bank Finance Company (NBFC) Required approval from Reserve Bank of India (Central Bank) Must maintain a minimum of $50 MM of capital Leases and loans, Project Finance & Infrastructure Financing

28 Challenges Slow legal process to enforce security rights, but generally reliable Tax authorities heavy hand Leasing cos under scrutiny due to fly by night finance companies Operating leases (as we know them) limited Fluctuating interest rates by RBI Securitization guidelines changing RBI rules re borrower limits. Single borrower applicability on Non Bank Finance Companies Repatriate funds withholding tax issues Registrar of Companies equivalent to our UCC Repossessing movabale assets relatively easy. Repossessing immovables often very time consuming

29 Success Stories Decent liquidity driving Capital Markets activities Deepening markets, more innovative structures being Introduced Securitization market built on the lines of the more mature US markets including adherence to FAS 140 requirement of True sale and Bankruptcy remote structures Incremental GE Company sales. Focus on Healthcare, Aviation, Water Large commercial vehicle leasing operation Well educated, hard working employees Completion of $150 MM Credit Default Swap $200 MM loans to large real estate co arranged