S&P downgrades ratings of KazMunaiGas National Company (Kazakhstan), Outlook "Stable"
08.07.09 12:03
/Standard & Poor's, Moscow, July 7, 09, Standard & Poor's English translation,
KASE headline/ - Standard & Poor's Ratings Services said today that it had
lowered its long-term corporate credit rating on Kazakh oil and gas holding
company JSC NC KazMunayGas (KMG) to 'BB+' from 'BBB-'. The outlook is
stable.
At the same time, the ratings were removed from CreditWatch, where they were
placed with negative implications on June 16, 2009.
The Kazakhstan national scale rating on the company was lowered to 'kzAA-' from
kzAA'.
The issue ratings on $1.4 billion medium-term notes due 2013 and $1.6 billion
medium-term notes due 2018 issued by KazMunaiGas Finance Sub B.V. and
guaranteed by KMG were lowered to 'BB+' from 'BBB-'.
"The rating action reflects our revised assessment of KMG's stand-alone credit
profile, which we assess as 'B+', as well as our opinion that there is an
"extremely high" likelihood of extraordinary government support for the
company," said Standard & Poor's credit analyst Andrey Nikolaev.
According to an annual report of KMG subsidiary JSC KazMunaiGas Exploration
Production (KMG EP), the companies of the KMG group are required by the
Kazakh government to hold a majority of their financial assets with domestic
banks. We understand that a substantial majority of group liquidity is held in
such banks. The companies of the group report considerable deposits with Halyk
Savings Bank of Kazakhstan (B+/Negative/B) and Kazkommertsbank
(B/Negative/C). The group companies also have deposits with BTA Bank (D/--/D).
This concerns us because, in our opinion, the liquidity and asset quality of
these banks is under pressure.
In our view, the flexibility KMG and its subsidiaries have in managing these
deposits is limited.
Mitigating our liquidity concerns and sustaining our confidence in the prospect
of extraordinary government support is a very recent Kazakhstani tenge 190
billion ($1.3 billion) 35-year subordinated bond issued by KMG in favor of
Samruk-Kazyna, a government holding company and KMG's 100% shareholder
(announced on July 2, 2009).
In accordance with our criteria for government-related entities, our view of an
"extremely high" likelihood of extraordinary government support is based on our
assessment of KMG's:
- Critical role' in the economy of Kazakhstan as the largest exporter, tax-payer
and spearhead of the Kazakh government's policy to increase the national
presence in the oil and gas sector.
- Very strong' link with the Kazakh government, its 100% shareholder, which,
however, requires the companies of the group to hold cash with domestic
banks, the credit quality of which is below that of the KMG group
The stand-alone credit profile of 'B+' reflects our assessment of KMG's business
risk profile as "fair" and financial risk profile as "aggressive".
The stable outlook reflects our expectation that KMG will continue to benefit
from an "extremely high" likelihood of government support and will be able to
maintain its stand-alone credit profile consistent with the 'B' category. It
also reflects the stable outlook on the sovereign, which underpins our assessment
of its ability to support KMG.
For details:
Andrei Nikolaev, Moscow, 7 (495) 783-41-31
Robert Richards, Frankfurt, 49 (69) 33-99-92-00
Analysts e-mails:
Andrey_Nikolaev@standardandpoors.com
Rob_Richards@standardandpoors.com
CorporateFinanceEurope@standardandpoors.com
[2009-07-08]