S&P raised National Welfare Fund Samruk-Kazyna (Kazakhstan) credit ratings at "ВВВ+/А-2", outlook "Stable"
09.11.11 10:58
/Standard & Poor's, London, November 8, 11, Standard & Poor's English
translation, KASE headline/ - -Standard & Poor's Ratings Services said
today that it raised its long- and short-term foreign currency counterparty
credit ratings on Samruk-Kazyna to 'BBB+/A-2', in line with the raising of
the sovereign foreign currency ratings. At the same time, we affirmed the
long- and short-term local currency counterparty credit ratings at 'BBB+/A-2',
and the Kazakhstan national scale rating at 'kzAAA'. The outlook is stable.
The ratings on Samruk-Kazyna are equalized with those on the Republic of
Kazakhstan (foreign currency BBB+/Stable/A-2; local currency BBB+/Stable/A-2;
Kazakhstan national scale kzAAA). This reflects our view of an "almost certain"
likelihood of the government providing timely extraordinary support sufficient
to service all debt, should the need arise in any severe downside scenario.
Our assessment of the likelihood of extraordinary support is based on our view
of Samruk-Kazyna's critical role as the main operator for the government's
off-budget financial and economic activities and the company's "integral" link
with the government.
Samruk-Kazyna is a 100% state-owned holding company that consolidates over
400 of Kazakhstan's state-owned enterprises, including vertically integrated
oil company NC KazMunaiGas, railway operator Kazazkhstan Temir Zholy,
electricity company KEGOC, telecom operator Kazakhtelecom, mining company
Kazatomprom, government-owned investment funds, stakes in several key local
banks, and a number of other entities in various sectors. These broad holdings
underpin our view of the entity's strategic importance. Samruk-Kazyna's
oversight role empowers it to monitor and approve large borrowings and
significant transactions for every subsidiary on behalf of the government.
The investments and financing decisions of the holding company reflect
government policy and the government's direct input via Samruk-Kazyna's
board of directors, which the prime minister chairs.
Standard & Poor's estimates Samruk-Kazyna's stand-alone credit profile (SACP)
at 'b+'. The key constraint on the ratings is the company's high exposure to
the relatively weak local banks, which themselves receive assistance from
Samruk-Kazyna. In our view, the situation in the Kazakh banking sector is
improving, and the liabilities of the banks that defaulted have been
appropriately restructured. Nevertheless, a high 42% of Samruk-Kazyna's
asset portfolio is in the form of equity stakes, loans to banks, and
deposits, and these also form a significant share of the fund's
recurring income.
The stand-alone credit profiles of Samruk-Kazyna's major subsidiaries are
relatively weak. At the holding level, recurring income consists of dividends
and interest. A significant part of the holding entity's income is not paid in
cash. For example, a considerable proportion of the interest on Samruk-Kazyna's
deposits with local banks is accumulated and used to repay Samruk-Kazyna's
liabilities with those banks. Similarly, the dividend from Samruk-Kazyna's
largest investment, KMG, is offset against a loan KMG extended to the holding
company in mid-2010.
Samruk-Kazyna's SACP reflects our expectation that the company will continue
to receive regular government support in the form of long-term loans and
capital injections. Most of the holding entity's debt is due to the government
or to its subsidiaries. By contrast, the subsidiaries' debt is mostly to third
parties, but these creditors have no recourse to Samruk-Kazyna.
The stable outlook reflects our outlook on ratings on the Republic of Kazakhstan
and our expectation that our assessments of Samruk-Kazyna's critical role in the
economy and integral link with the government are unlikely to change.
We could raise or lower the ratings on Samruk-Kazyna if the ratings on
the Republic of Kazakhstan were raised or lowered. Any signs of weakening
sovereign support, either because of deviation from Samruk-Kazyna's policy
role or because of a weakening link with the government, may change our
assessment of Samruk-Kazyna's role, and of its link with the government,
and this would result in downward pressure on the rating.
Analysts contacts:
Ana Jelenkovic, London, +442071767116
Ana_Jelenkovic@standardandpoors.com
Elena Anankina, Moscow, 7 (495) 783-41-30
elena_anankina@standardandpoors.com
Kai Stukenbrock, Frankfurt, 49 (69) 33-99-92-47
kai_stukenbrock@standardandpoors.com
[2011-11-09]