MOODY'S DOWNGRADES FOOD CONTRACT CORPORATION TO BA1, RATINGS REMAIN UNDER REVIEW
16.07.09 12:18
/Moody's Investors Service, London, July 15, 09/ - Moody's Investors Service
has today downgraded to Ba1 from Baa3 the senior unsecured issuer rating
of JSC National Company Food Contract Corporation ("FCC" or "the
company"). Concurrently, Moody's has withdrawn the issuer rating and has
assigned a Ba1 Corporate Family rating and probability of default rating. The
company's ratings remain under review for possible downgrade.
"Today's rating action results from Moody's downward revision of the
company's baseline credit assessment (BCA - one of the contributing factors
to the corporate family rating alongside assumptions on support and
dependence) to 16 (B3 equivalent) from 14 (B1 equivalent). The rating action
was prompted by Moody's concerns surrounding the company's reduced
flexibility within the covenants on its foreign currency debt, which we
understand has been exacerbated by the recent devaluation of the Kazakh
Tenge" says Stefano del Zompo, lead analyst for FCC at Moody's. "Moody's
expects the lending banks and the government to continue to remain
supportive of the company to meet its financial commitments going forward,
although it will continue to closely monitor the materialization and timeliness
of this ongoing support".
"The current rating also reflects Moody's belief that, given the high reliance of
the company on external funding from the government to meet it financial
obligations, the government will continue to sustain the company as it has
done in the past, recognizing the strategic importance of the agriculture
sector for Kazakhstan and the role played by FCC in its development"
explains Mr. del Zompo.
The rating remains under review for possible further downgrade. Moody's
review will focus on: (1) the financial covenants testing in coming quarters
and the flexibility of the international banks in this regard; (2) the degree and
timeliness of the government's financial support in rebuilding sufficient
headroom under the covenants over the next few quarters; and (3) the short-
to medium-term prospects of the company and its capacity to withstand the
current economic downturn in light of the planned investment program and
available capital resources.
The company's rating might be affirmed were the headroom within the
covenants on FCC's debt to be reconstituted to 2008 levels in conjunction
with continued evidence of support from lending banks and the government.
Conversely, a change in the assumptions regarding government support to
the company or a failure to obtain a waiver from lending banks might result in
a further rating downgrade.
The last rating action was on 15 June 2009 when Moody's put FCC's Baa3
ratings on review for downgrade given concerns regarding the company's
standalone creditworthiness primarily prompted by the concerns highlighted
above in conjunction with also reviewing our support and dependence
assumptions.
The principal methodology used in rating FCC was Moody's Rating
Methodology for Government-Related Issuers ("GRIs") introduced in June
2005. Please, refer to Moody's Rating Methodology entitled "The Application
of Joint Default Analysis to Government-Related Issuers", published in June
2005 and updated in July 2006. Other methodologies and factors that may
have been considered in the process of rating this issuer can also be found
in the Credit Policy & Methodologies directory on Moody's website.
Headquartered in Astana, Kazakhstan, JSC National Company Food
Contract Corporation is fully owned by the state of Kazakhstan through the
National Holding KazAgro. FCC's principal mandate is to maintain state grain
reserves at the levels required to supply the Kazakh population and to
ensure timely grain replenishment. At the end of December 2008, FCC
employed 1,718 people and reported revenues at KZT35 billion up from
KZT24 billion the previous year.
Paris
Myriam Durand
Managing Director
Corporate Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Stefano Del Zompo, CFA
Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
[2009-07-16]