Moody's downgrades ratings of Alliance Bank (Kazakhstan)

/REUTERS, April 1, 09, heading by KASE/ - Alliance Bank's deposit and senior unsecured debt ratings remain on review for possible further downgrade; SAFC's issuer ratings carry a negative outlook Moscow, April 01, 2009 - Moody's Investors Service has today downgraded Alliance Bank's local and foreign currency deposit ratings to Caa3 from B2, and the foreign currency senior unsecured debt rating to Ca from B2. The bank's subordinated and junior subordinated foreign currency debt ratings have been downgraded to C with a stable outlook. The bank financial strength rating (BFSR) of E has been affirmed. At the same time, the rating agency downgraded issuer ratings of Seimar Alliance Financial Corporation (SAFC) - a holding company of Alliance Bank - to Ca from Caa1. Alliance Bank's deposit and senior unsecured debt ratings remain on review for possible further downgrade while SAFC's issuer ratings carry a negative outlook. Today's rating actions conclude a review for possible downgrade that had been initiated on 6 February 2009. "The rating downgrade of Alliance Bank reflects the increasing likelihood of default and debt restructuring of the bank's liabilities stemming from the ongoing deterioration in the financial strength of both Alliance Bank and SAFC, the acceleration of Alliance Bank's public debt repayment schedule and reduced probability of government support to honour its foreign liabilities," says Semyon Isakov, a Moscow-based Moody's Analyst. Moody's understands that a significant portion of Alliance Bank's indentures have early amortisation clauses that have been already partly triggered, which, together with the expected nationalisation of the bank through its acquisition by Samruk-Kazyna government fund, creates the legal framework for the accelerated repayment of the bank's debt amounting for approximately two thirds of its funding base. In Moody's opinion, the stand- alone financial strength of Alliance Bank makes the accelerating repayment of such volume of debt fairly difficult. Furthermore, Moody's believes that the recent public statements by representatives of Samruk-Kazyna government fund (mainly in respect of the other large Kazakh bank BTA) indicate that government support in this situation is unlikely to be forthcoming. Therefore, Moody's now believes there is no likelihood of systemic support incorporated in Alliance Bank's ratings, and the current senior unsecured ratings now match with the bank's Baseline Credit Assessment (BCA) of Ca. Moody's also expects that in order to maintain stability in the Kazakh banking system, the government may provide some support to Alliance Bank's depositors. As a result, the bank's Caa3 foreign and local currency deposit ratings factor in Moody's assessment of moderate probability of systemic support and receive a one-notch uplift from its BCA of Ca. The downgrade of SAFC's issuer ratings to Ca from Caa1 resulted from notching down from Alliance Bank's deposit ratings. Moody's previous rating action on Alliance Bank was on 6 February 2009 when the bank's BFSR was downgraded to E from E+, and local and foreign currency deposit and foreign currency senior unsecured debt ratings were downgraded to B2 from Ba2. At that time, the bank's deposit and debt ratings remained on review for possible further downgrade. Headquartered in Almaty, Kazakhstan, Alliance Bank had assets of KZT1.069 trillion (US$8.9 billion) at end-June 2008. Moody's previous rating action on SAFC was on 6 February 2009 when the company's Ba3 local and foreign currency issuer ratings were downgraded to Caa1. At that time, the company's deposit and debt ratings remained on review for possible further downgrade. Based in Almaty, Kazakhstan, SAFC is a holding company that includes a banking segment (represented largely by Alliance Bank), as well as non- banking lending, life and non-life insurance, financial brokerage and business support segments. The principal methodologies used in rating Alliance Bank and SAFC are "Bank Financial Strength Ratings: Global Methodology" and "Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology", which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating these entities can also be found in the Credit Policy & Methodologies directory. Moscow Semyon Isakov Analyst Financial Institutions Group Moody's Eastern Europe LLC Telephone: +7 495 228 6060 Facsimile: +7 495 228 6091 London Reynold R. Leegerstee Managing Director Financial Institutions Group Moody's Investors Service Ltd. JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 [2009-04-02]