Fitch downgrades KazAgroFinance (Kazakhstan) ratings and affirms Development Bank of Kazakhstan ratings

/ Fitch Ratings, London-Moscow, December 29, 09, Fitch Ratings English translation, KASE headline/ - Fitch Ratings has today downgraded Kazakhstan-based KazAgroFinance's (KAF) ratings, including its Long-term foreign currency Issuer Default Rating (IDR) to 'BB' from 'BB+', thereby resolving the Rating Watch Negative (RWN) on the rating. At the same time, Fitch has affirmed the ratings of Development Bank of Kazakhstan (DBK), including its Long-term foreign currency IDR of 'BBB-', and revised the Outlook to Stable from Negative. A full rating breakdown is provided at the end of the commentary. The downgrade of KAF reflects Fitch's revised view of the probability that government support would be made available to the company, in case of need. This revised view takes into account the defaults of other Kazakh financial companies during 2009, and also considers KAF's less prominent policy role and lesser importance for the country's economy relative to DBK. At the same time, the company's ratings continue to factor in a moderate probability of government support in light of state ownership of KAF, the company's small size (and hence cost of support) and the government financial assistance which has been made available to date. KAF was established in 1999 as a development finance institution to provide credit facilities (predominantly finance leases) for the domestic agriculture industry. The company is a subsidiary of JSC National Holding Kazagro (which in turn is owned by the government), which also owns a number of other financial institutions that support economic development in rural areas. The affirmation of DBK's ratings and the revision of the Outlook to Stable from Negative follow similar actions on Kazakhstan's sovereign ratings on 16 December 2009. DBK's ratings reflect Fitch's view of the high probability of support from the Kazakh authorities, in case of need, given state ownership, the bank's key role in the implementation of the government's development efforts and DBK's still moderate size. However, Fitch notes that downward pressure on the ratings could arise over the medium term should the bank continue to expand rapidly, resulting in its (non-government) debt and balance sheet size becoming more substantial relative to those of the sovereign. Leverage is currently moderate and liquidity comfortable, but continued growth could lead to a weakening of DBK's stand-alone credit profile in these areas. DBK was founded to foster the growth of non-extracting industries in Kazakhstan. It is 100%-owned by the National Welfare Fund Samruk- Kazyna, which in turn is wholly owned by the Kazakhstani government. The rating actions are as follows: Development Bank of Kazakhstan Long-term foreign currency IDR: affirmed at 'BBB-'; Outlook revised to Stable from Negative Long-term local currency IDR: affirmed at 'BBB'; Outlook revised to Stable from Negative Short-term foreign currency IDR: affirmed at 'F3' Short-term local currency IDR: affirmed at 'F3' Support Rating: affirmed at '2' Support Rating Floor: affirmed at 'BBB-' Senior unsecured debt: affirmed at 'BBB-' KazAgroFinance Long-term foreign currency IDR: downgraded to 'BB' from 'BB+'; removed from RWN; assigned a Stable Outlook Long-term local currency IDR: downgraded to 'BB' from 'BBB-'; removed from RWN; assigned a Stable Outlook Short-term foreign currency IDR: affirmed at 'B' National Long-term rating: downgraded to 'A(kaz)' from 'AA(kaz)'; Outlook Stable Support Rating: affirmed at '3' Support Rating Floor: downgraded to 'BB' from 'BB+'; removed from RWN. Contacts: Alexei Kechko, Maxim Miller, Moscow, tel.: +4 795 956 9901 Media Relations: Marina Moshkina, Moscow, tel.: + 7 495 956 6904/9901, marina.moshkina@fitchratings.com [2009-12-30]