S&P Downgraded Mortgage Guarantee Fund of Kazakhstan To 'BB-/kzA-', Outlook Stable
17.09.09 11:48
/Standard & Poor's, Moscow, September 16, 09/ - Mortgage Guarantee Fund of
Kazakhstan Downgraded To 'BB-/kzA-'; Outlook Stable.
- We have applied our revised methodology for rating government-related
entities to Mortgage Guarantee Fund of Kazakhstan and have received
comfort that, in case of financial distress, Mortgage Guarantee Fund of
Kazakhstan would benefit from a "moderately high" likelihood of support
from the Kazakh government.
- We are lowering our issuer credit and Kazakhstan national scale ratings on
Mortgage Guarantee Fund of Kazakhstan to 'BB-' and 'kzA-'.
- The outlook is stable, mirroring the outlook on the sovereign.
- We continue to see stand-alone at 'B' given its weak financials.
Standard & Poor's Ratings Services said today that it had lowered its long-term
issuer credit and Kazakhstan national scale ratings on Mortgage Guarantee Fund
of Kazakhstan (JSC) (MGFK), a specific type of mortgage insurance provider
100% owned by the Republic of Kazakhstan (foreign currency BBB-/Stable/A-3;
local currency BBB/Stable/A-3; Kazakhstan national scale 'kzAAA') to 'BB-' and
kzA-' from 'BB' and 'kzA'. The outlook is stable.
At the same time, the ratings were removed from CreditWatch, where they had
been placed with negative implications on June 16, 2009. Before the CreditWatch
placement, the outlook was stable.
"The downgrade and removal from CreditWatch follow our application of our
revised methodology for rating government-related entities," said Standard &
Poor's credit analyst Boris Kopeykin.
The ratings reflect our expectations of a "moderately high" likelihood of timely
and sufficient extraordinary support to MGFK from the Kazakh government in case
of financial distress.
The ratings also incorporate MGFK's weak stand-alone credit profile, which we
assess at 'B'. This opinion is based on the company's short track record, weak
and volatile financial position, and limited scale of operations, although it
has a lack of debt and a commitment to a policy of "no debt".
In accordance with our criteria for government-related entities, our view of a
"moderately high" likelihood of extraordinary government support is based on our
assessment of MGFK's:
- "Limited importance" for the government. This is because the company is
small and has just over Kazakhstani tenge (KZT) 4 billion in capital ($28
million). The company has a relatively narrow public policy mandate. MGFK
is a specific type of mortgage insurance provider, the main role of which is
to provide guarantees on loans provided under the state-sponsored mortgage
program. MGFK is involved in several state-sponsored housing program and
has participated in about 60% of apartment purchases concluded as part of
these programs, guaranteeing about KZT50 billion. But in total its guarantees
cover only about 7.5% of all mortgages issued in Kazakhstan. Our view on
MGFK's "limited" role also incorporates the past track record of support to
MGFK in the form of recurring capital injections, with the most recent one
provided in 2007. We expect the company to be involved in future
government-sponsored mortgage programs.
- "Very strong" link with the Kazakh government. The Kazakhstan government
wholly owns MGFK through Samruk-Kazyna holding. Privatization of MGFK
was being discussed, but was cancelled in late 2008. The government tightly
monitors MGFK's activities through Samruk-Kazyna. The holding company
has just appointed a new board and is likely to finally set the updated
strategy for MGFK in November-December 2009.
The 'B' stand-alone credit profile reflects MGFK's short track record, weak and
volatile financial position, with losses reported, and limited scale of
operations. As of July 1, 2009, MGFK had guaranteed mortgage loans worth about
KZT50 billion ($340 million). Mortgage insurance provided under the
state-sponsored programs comprises about 90% of MGFK's portfolio, and should
remain at a similar level until 2010. The stand-alone rating also incorporates
MGFK's commitment to a policy of "no direct debt" and that so far, no calls have
been made on its guarantees.
The outlook on MGFK is stable because the outlook on Kazakhstan is stable. We
expect the government to continue to expand MGFK's capital in the medium term.
Furthermore, we do not expect any changes in the policy and regulatory
framework that would challenge our expectations of a "moderately high"
probability of support to MGFK from the government in case of financial
distress.
"A negative rating action on Kazakhstan, or a change in our expectations of
timely and sufficient extraordinary support to MGFK from the government
because of weakening government support, could pressure the ratings," said
Mr. Kopeykin.
The rating could also come under pressure should MGFK's financial position and
liquidity deteriorate compared with currently expected levels.
Ratings upside could result from a stronger sovereign credit profile, or a
higher probability of extraordinary support.
RELATED RESEARCH
- Enhanced Methodology And Assumptions For Rating Government-Related
Entities, June 29, 2009
- Principles Of Corporate And Government Ratings, June 26, 2007
Primary Credit Analyst:
Boris Kopeykin, Moscow, (7) 495-783-4062;
boris_kopeykin@standardandpoors.com
Secondary Credit Analysts:
Felix Ejgel, Moscow, (7) 495-783-4060;
felix_ejgel@standardandpoors.com
Additional Contact:
International Public Finance Ratings Europe;
PublicFinanceEurope@standardandpoors.com
[2009-09-17]