S&P places three Kazakhstan companies on CreditWatch with negative outlook on state support concerns
17.06.09 13:02
/Standard & Poor's, Moscow, June 16, 09, heading by KASE/ - Standard & Poor's
Ratings Services said today that it had taken the following specific rating
actions:
- The 'BB+' long-term corporate credit and 'kzAA-' Kazakhstan national scale
ratings on Kazakhstan Temir Zholy (KTZ) were placed on CreditWatch with
negative implications;
- The 'BB+' long-term corporate credit and 'kzAA-' Kazakhstan national scale
ratings on JSC Kaztemirtrans (KTT) were placed on CreditWatch with
negative implications;
- The 'BB+' long-term corporate credit rating on Kazakhstan Electricity Grid
Operating Co. (JSC) (KEGOC) was placed on CreditWatch with negative
implications.
Our placement of KTZ and its subsidiary KTT, the ratings on which are equalized
with those on KTZ, on CreditWatch with negative implications reflects our
concerns about the high concentration of their large cash reserves in several
local banks, notably (B+/Negative/B) and
(B/Negative/C). In our opinion, the liquidity and asset
quality of these banks remain under pressure.
"We believe such concentration might result in restricted flexibility for KTZ
and KTT in managing their cash assets," said Standard & Poor's credit analyst
Sergei Gorin. Those assets comprised $413 million in cash and deposits as of
March 31, 2009 (including $45 million at the level of KTT). This causes us to
believe that KTZ and KTT's liquidity is not as strong as we previously assumed.
Meanwhile, assigning ratings to KTZ, we expected the group to have high
liquidity, as it needs funds (USD450 m.) to repay Eurobonds in 2011.
KEGOC has a positive track record of receiving strong ongoing and extraordinary
financial support from the state, including equity injections to cover liquidity
shortfalls, which shows the government's willingness to provide support and
justifies our top-down approach to determine the rating, which is two notches
below the sovereign long-term local currency rating. However, KEGOC's stand-
alone credit quality is rather weak because of its large investment program and
high leverage. The company's future credit quality therefore largely depends on
the continuity of strong government support, while the government is facing the
need to support a weakened banking system. If the government reconsiders its
level of support to KEGOC, the ratings on KEGOC might be lowered due to its
rather weak stand-alone creditworthiness (we assess KEGOC's stand-alone credit
quality at 'B+').
Standard & Poor's plans to review the CreditWatch placement on KTZ, KTT, and
KEGOC when we have a greater understanding of the level of financial support
the government will provide to the companies and their flexibility in managing
their liquidity. "If we believe their liquidity positions have deteriorated or
if there are indications of lower state support, we could lower our estimation
of the companies' stand-alone credit profiles and/or lower the corporate credit
ratings on the companies," said Mr. Gorin.
Ratings list
Kazakhstan Temir Zholy
To From
Credit rating
ВВ+/Watch Negative/- ВВ+/Stable/-
National scale
kzAA-/Watch Negative kzAA-
KazTemirTrans
Credit rating
ВВ+/Watch Negative/- ВВ+/Stable/-
National scale
kzAA-/Watch Negative kzAA-
Kazakhstan Electricity Grid Operating Company
Credit rating
ВВ+/Watch Negative/- ВВ+/Stable/-
Note: The list does not include all ratings affected.
For further information, please, contact:
Sergei Gorin, Moscow, 7 (495) 783-41-32
Peter Kernan, London, 44 (207) 176-36-18
Boris Kopeykin, Moscow, 7 (495) 783-40-62
Lidia Polakovich, London, 44 (207) 176-39-85
E-mails of analysts:
Sergey_Gorin@standardandpoors.com
Peter_Kernan@standardandpoors.com
Boris_Kopeykin@standardandpoors.com
Lidia_Polakovic@standardandpoors.com
GroupE-MailAddress@standardandpoors.com
[2009-06-17]