FITCH AFFIRMS 7 KAZAKH COMPANIES
08.06.09 16:31
/Fitch Ratings, London-Moscow, June 5, 09, heading by KASE/ - Fitch
Ratings-London/Moscow-05 June 2009: Fitch Ratings has today affirmed the
Long-term foreign currency Issuer Default Ratings (IDRs), Short-term foreign
currency IDRs, Long-term local currency IDRs (where applicable), senior
unsecured ratings (where applicable), and national Long-term ratings (where
applicable) of seven Kazakh corporates. Fitch has simultaneously removed
their ratings from Rating Watch Negative (RWN) and, assigned Negative
Outlooks to the companies' Long-term foreign currency IDRs Long-term local
currency IDRs (where applicable) and national Long-term ratings (where
applicable).
The rating actions reflect today's affirmation of Kazakhstan's Long-term
foreign and local currency IDRs at 'BBB-' and BBB, respectively, and its
Short-term foreign currency IDR at 'F3'. The agency has removed
Kazakhstan's ratings from RWN and assigned Negative Outlooks to its Long-
term foreign and local currency IDRs.
The sovereign rating action reflects Fitch's view that the risk of an immediate
abrupt deterioration of the sovereign balance sheet has eased, however, the
ratings remain under pressure due to the potential costs for the sovereign of
coping with the economic slowdown and financial crisis.
The rating actions affecting the seven Kazakh companies are as follows.
KazMunaiGaz National Company (NC KMG)
Long-term foreign currency IDR: affirmed at 'BBB-'; removed from RWN;
assigned a Negative Outlook
Long-term local currency IDR: affirmed at 'BBB'; removed from RWN;
assigned a Negative Outlook
Short-term foreign currency IDR: affirmed at 'F3'; removed from RWN
Senior unsecured rating: affirmed at 'BBB-'; removed from RWN
NC KMG's ratings are aligned with the sovereign's because it was
established as a wholly state-owned enterprise to represent the interests of
the government in Kazakhstan's oil and gas industry.
JSC KazMunaiGas Exploration Production (KMG EP)
Long-term foreign currency IDR: affirmed at 'BBB-'; removed from RWN;
assigned a Negative Outlook (The rating is constrained by Kazakhstan's
sovereign rating.)
Long-term local currency IDR: affirmed at 'BBB-'; removed from RWN;
assigned a Negative Outlook
Short-term foreign currency IDR: affirmed at 'F3'; removed from RWN
JSC KazTransOil (KTO)
Long-term foreign currency IDR: affirmed at 'BBB-'; removed from RWN;
assigned a Negative Outlook (The rating is constrained by Kazakhstan's
sovereign rating.)
Short-term foreign currency IDR: affirmed at 'F3'; removed from RWN
Fitch rates NC KMG's subsidiaries (including KMG EP and KTO) primarily on
a standalone basis. Fitch believes that KMG EP's current solid financial
profile which is underpinned by strong profitability, its low debt level, ample
cash position and moderate capex programme will provide a cushion against
the cyclical downturn in the global oil and gas markets and the worldwide
economic slowdown. Nevertheless, the ultimate state ownership of KMG EP
and the other subsidiaries rated on a standalone basis exposes them to
being constrained by the sovereign rating, should it deteriorate further.
The ratings of NC KMG's other subsidiaries - KazTransGas and JSC Intergas
Central Asia - are unaffected. They are as follows:
KazTransGas:
Long-term foreign currency IDR: 'BB'; Outlook Stable
Short-term foreign currency IDR: 'B'
Long-term local currency IDR: 'BB'; Outlook Stable
JSC Intergas Central Asia:
Long-term foreign currency IDR: 'BB+'; Outlook Stable
Short-term foreign currency IDR: 'B'
Long-term local currency IDR: 'BB+'; Outlook Stable
Senior unsecured rating: 'BB+'
JSC National Atomic Company Kazatomprom (Kazatomprom)
Long-term foreign currency IDR: affirmed at 'BBB-'; removed from RWN;
assigned a Negative Outlook (The rating is constrained by Kazakhstan's
sovereign rating.)
Short-term foreign currency IDR: affirmed at 'F3'; removed from RWN
Kazatomprom is a 100% state-owned uranium operator. Kazatomprom's
ratings reflect the company's strong position in the global uranium market, its
strategic importance to Kazakhstan and its solid financial profile.
Kazakhstan Temir Zholy (KTZ)
Long-term foreign currency IDR: affirmed at 'BBB-'; removed from RWN;
assigned a Negative Outlook
Senior unsecured rating: affirmed at 'BBB-'; removed from RWN
KTZ's ratings are aligned with the sovereign's, given the 100% state-owned
railway company's strategic importance to Kazakhstan due to the country's
vast terrain, land-locked position and underdeveloped road infrastructure.
Fitch notes that KTZ's YE09 leverage (1.3x at YE08) may approach its
covenant level of 2.5x given the devaluation of the Kazakh tenge in February
2009 (the company's debt is largely denominated in foreign currencies), debt
funded capex and lower transportation volumes. Fitch expects management
to revise its capex plans in order to limit an increase in leverage.
Kazakhstan Electricity Grid Operating Company (KEGOC)
Long-term foreign currency IDR: affirmed at 'BBB-'; removed from RWN;
assigned a Negative Outlook
Long-term local currency IDR: affirmed at 'BBB'; removed from RWN;
assigned a Negative Outlook
Short-term foreign currency IDR: affirmed at 'F3'; removed from RWN
KEGOC's ratings are aligned with the sovereign's given its 100% state
ownership, state guarantees for some of its debt, and strong state support
resulting from the strategic nature of Kazakhstan's national electricity
transmission grid. KEGOC's Negative rating Outlook also has an additional
component: Fitch notes that KEGOC has breached a receivable days ratio
under a Development Bank of Kazakhstan facility. The company is also
expected to breach its 5x debt to EBITDA covenant with the European Bank
for Reconstruction and Development later this year as a result of the Kazakh
tenge's devaluation in February 2009 (the company's debt is largely USD
denominated), weaker cash flow generation and debt-funded capex. Fitch
currently expects covenant waivers to be provided and/or liquidity support
from the government (approved for 2011-2017) to be fast-tracked. Fitch may
place KEGOC's ratings on RWN should one of these measures fail in the
near term and its bank lenders and, more importantly for the state-supported
rating, the government and industry regulator do not satisfactorily resolve
existing issues.
Mangistau Electricity Distribution Network Company (MEDNC)
Long-term foreign currency IDR: affirmed at 'BB'; removed from RWN;
assigned a Negative Outlook
Foreign currency senior unsecured rating: affirmed at 'BB'; removed from
RWN
Short-term foreign currency IDR: affirmed at 'B'
Long-term local currency IDR: affirmed at 'BB+'; removed from RWN;
assigned a Negative Outlook
Local currency senior unsecured rating: affirmed at 'BB+'; removed from
RWN
National Long-term Rating: affirmed at 'AA-(kaz)'; removed from RWN;
assigned a Negative Outlook.
MEDNC's ratings are linked to the sovereign's, but notched down to reflect
that little indication has been given by MEDNC's ultimate parent, Samruk,
that it will provide timely financial assistance in case of need. The company
has a near-monopoly position in electricity transmission and distribution in
Mangistau, one of Kazakhstan's strategic oil and gas regions. MEDNC's debt
is denominated in Kazakh tenge and its revenues have not been significantly
affected by the economic slowdown.
For further information on the sovereign rating action taken by Fitch today,
please see the 5 June 2009 comment, entitled 'Fitch Affirms Kazakhstan; Off
Rating Watch Negative; Assigns Negative Outlook', which is available on the
agency's public website, www.fitchratings.com.
Contact:
Angelina Valavina, London, tel.: +44 20 7682 7383
Josef Pospisil, London, tel.: +44 20 7682 7339
Nikolai Lukashevich, Moscow, tel.: +7 495 956 9901
[2009-06-08]