S&P assigned 'BBB-' rating to the proposed notes issued by Kazakh Oil Giant JSC NC KazMunayGas

/Standard & Poor's, Moscow, June 16, 08/ - Standard & Poor's Ratings Services said today that it assigned its 'BBB-' rating to the senior unsecured proposed notes to be issued by the financial vehicle KazMunaiGaz Finance Sub B.V. and guaranteed by Kazakh state-owned oil and gas holding JSC NC KazMunayGas (KMG; BBB-/Negative/--). The notes are issued under the $3 billion medium-term notes program. The exact amount and maturity of the current issue are to be determined at placement. The proceeds will likely be used for refinancing and general corporate purposes. The rating on the proposed notes reflects the long-term corporate credit rating on KMG, because KMG has provided an unconditional and irrevocable guarantee. KMG has substantial debt at the operating subsidiary level. However, the stand-alone credit quality of its most indebted subsidiaries-- The Rompetrol Group N.V. (B+/Stable/--) and KazTransGas (BB/Negative/--)--is well below that of the parent. Moreover, the ratings on these subsidiaries factor in potential support from KMG. At the same time, the debt at the group's most cash-generative subsidiaries and associated entities, JSC KazMunaiGas Exploration Production (KMG EP; BB+/Negative/--), PetroKazakhstan Inc. (NR/--/--), and TengizChevrOil-- which could be treated as priority--is not large. Therefore, we do not notch down the issue rating from the corporate credit rating. The rating on KMG, in turn, is based on a top-down approach. It is one notch below the long-term local currency corporate credit rating on the Republic of Kazakhstan (foreign currency BBB-/Negative/A-3; local currency BBB/Negative/A-3; Kazakhstan national scale rating 'kzAAA'). The negative outlook on KMG mirrors that on the sovereign. We believe that KMG's role as the government's key agent in the strategically vital oil and gas sector highlights the likelihood of ongoing and extraordinary state support. The difference with the local currency rating on the sovereign reflects the absence of state guarantees, KMG's ambitious investment strategy--which will continue to push up the group's debt--and the fact that KMG's majority-owned operations account for only about 25% of Kazakhstan's oil production. For detailed information please contact to: Elena Anankina, Moscow (7) 495-783-4130; elena_anankina@standardandpoors.com Eugene Korovin, Moscow (7) 495-783-4090; evgueni_korovin@standardandpoors.com [2008-06-16]