Fitch upgrades Mortgage Organization Kazakhstan Mortgage Company ratings, Outlook "Stable"

/Fitch Ratings, Moscow-London, November 26, 12, Fitch Ratings English translation, KASE headline/ - Fitch Ratings has upgraded Kazakhstan Mortgage Company's (KMC) Long-term foreign currency rating to 'BB+' from 'BB' and Long-term local currency rating 'BBB-' from 'BB+'. The Short-term foreign currency rating has been affirmed at 'B'. The Outlooks on the Long-term ratings are Stable. The rating action also applies to the company's outstanding bonds totalling KZT66.1bn. The rating actions reflect an improvement in the sovereign's ability to provide support to KMC and follow the upgrade of Kazakhstan's Long-term foreign currency Issuer Default Rating (IDR) to 'BBB+/Stable' from 'BBB/Positive' and Long-term local currency IDR to 'A-/Stable' from 'BBB+/Positive' (see 'Fitch Upgrades Kazakhstan to 'BBB+'; Outlook Stable' dated 20 November 2012 at www.fitchratings.com). KMC's ratings reflect the company's ownership by the government, its strategic importance in the area of social housing and Fitch's expectations of government support in the form of a moderate capital injection in KMC budgeted by the national government for 2013-2015. Fitch used its public-sector entities rating criteria and applies a top-down approach in its analysis of KMC. The three-notch difference between the rating of the state and that of KMC reflects the lack of government support in 2008-2012 and KMC's relative independence. Its debt is decided by its own management which in state accounts is not consolidated with government debt. No funding was earmarked for KMC in the 2008-2012 state budget. An upgrade could occur if the sovereign was upgraded or if as a result of the planned housing programme KMC becomes more closely integrated with the government. The latter could mean explicit government support in the form of sizeable capital injections sufficient to change the structural position of KMC into a more focused instrument of government policy. Fitch notes that a weakening or absence of state support visible primarily in a delay or lack of the planned state recapitalisation of KMC in 2013 could lead to Fitch to change its approach to the rating to a standalone basis (from the top down), which would result in a multiple-notch downgrade. KMC acts as the government's agent in the area of affordable housing provision and plays a crucial role in implementing government social housing programmes for low and middle income households. As part of an approved state programme Affordable housing 2020', it is planned that KMC will receive about KZT75bn of capital injections from the Kazakhstan government over 2013-2015. Additionally, KMC contributes to the stability and development of Kazakhstan's financial sector through refinancing mortgage loans of commercial banks, securitisation of mortgages and by issuing bonds. A credit analysis on KMC is available at www.fitchratings.com. Contacts: Primary Analyst, Vladimir Redkin, Director, +7 495 95670 64, Fitch Ratings CIS Ltd, 26 Valovaya Street, Moscow, 125047 Secondary Analyst, Behruz Ismailov, Analyst, +7 495 95699 80 Committee Chairperson, Raffaele Carnevale, Senior Director, +48 22 33862 84 Media Relations: Julia Belskaya von Tell, Moscow, Tel: + 7 495 956 9908/9901, julia.belskayavontell@fitchratings.com [2012-11-28]