Fitch downgrades four Kazakh public sector entities from "BBB+" to "BBB"

/Fitch Ratings, Moscow, May 6, 2016, KASE headline/ – Fitch Ratings has downgraded Kazakhstan public sector entities (PSEs) JSC Sovereign Wealth Fund Samruk-Kazyna (SK) and JSC National Management Holding Baiterek's (Baiterek) Long-term foreign currency IDRs to 'BBB' from 'BBB+'. At the same time Fitch has also downgraded KazAgro National management holding JSC (KazAgro) and Kazakhstan Mortgage Company's (KMC) Long-term foreign currency IDRs to 'BBB-' from 'BBB'. A full list of rating actions is at the end of this commentary. KEY RATING DRIVERS The rating actions follow Fitch's recent downgrade of Kazakhstan's Long-term foreign currency IDR to 'BBB' from 'BBB+' (see 'Fitch Downgrades Kazakhstan to 'BBB'; Outlook Stable' dated 29 April 2016 at www.fitchratings.com). Fitch uses its PSE rating criteria, top-down approach, in its analysis of four Kazakhstan PSEs and views them as being credit-linked to the sovereign. The ratings of the four entities do not extend to their subsidiaries' obligations. SK's IDRs remain equalised with those of Kazakhstan, reflecting its strong links with the sovereign and high propensity of state support. This is evidenced by SK's special legal status, its strategic role as an extension of the government in managing its core assets, strong operational and financial integration with the government, and tight control by the latter along with maintenance of 100% state ownership. Baiterek's IDRs remain equalised with the sovereign IDRs, which reflects the company's unchanged special legal status, its strategic importance for state policy on economic development and diversification, and strict state control. Fitch considers that the recently announced large-scale national privatisation programme will not weaken these major rating factors. KazAgro's IDRs have been downgraded and a one-notch rating differential from Kazakhstan's ratings has been maintained, reflecting a "mid-ran the sovereign ratings provided that KMC's links to the government are unchanged, or from tighter integration with the sovereign, including an explicit government guarantee. Changes to the legal status leading to a dilution of control or weakening of support by the sovereign could lead Fitch to widen the notching from the sovereign to two notches, resulting in a downgrade. Negative rating action on the Republic of Kazakhstan would also be reflected by KMC's ratings. The rating actions are as follows: JSC Sovereign Wealth Fund Samruk-Kazyna - Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable - Long-term local currency IDR: downgraded to 'BBB' from 'A-'; Outlook Stable - Short-term foreign currency IDR: affirmed at 'F2' - National Long Term Rating: affirmed at 'AAA(kaz)'; Outlook Stable - Senior unsecured domestic bonds: downgraded to 'BBB' from 'A-', affirmed at 'AAA(kaz)' National Management Holding Baiterek - Long-term foreign currency IDR: downgraded to 'BBB' from 'BBB+'; Outlook Stable - Long-term local currency IDR: downgraded to 'BBB' from 'A-'; Outlook Stable - Short-term foreign currency IDR: affirmed at 'F2' - National Long Term Rating: affirmed at 'AAA(kaz)'; Outlook Stable - Senior unsecured domestic bonds: downgraded to 'BBB' from 'A-', affirmed at 'AAA(kaz)' JSC KazAgro National management holding - Long-term foreign currency IDR: downgraded to 'BBB-' from 'BBB'; Outlook Negative - Long-term local currency IDR: downgraded to 'BBB-' from 'BBB+'; Outlook Negative - Short-term foreign currency IDR: affirmed at 'F3' - Senior unsecured eurobonds: downgraded to 'BBB-' from 'BBB' - Senior unsecured domestic bonds: downgraded to 'BBB-' from 'BBB+' Kazakhstan Mortgage Company - Long-term foreign currency IDR: downgraded to 'BBB-' from 'BBB'; Outlook Stable - Long-term local currency IDR: downgraded to 'BBB-' from 'BBB+'; Outlook Stable - Short-term foreign currency IDR: affirmed at 'F3' - Senior unsecured domestic bonds: downgraded to 'BBB-' from 'BBB+' - Senior secured domestic bonds: downgraded to 'BBB-' from 'BBB+' - Subordinated domestic bonds: downgraded to 'BB+' from 'BBB' Contact: Primary Analysts Konstantin Anglichanov (SK, KazAgro) Director +7 (495) 956-9994 Fitch Ratings Moscow Valovaya str., 26 Moscow Vladimir Redkin (Baiterek) Senior Director +7 (495) 956-9901 Fitch Ratings Moscow Valovaya str., 26 Moscow Elena Ozhegova (KMC) Associate Director +7 (495) 956-9901 Fitch Ratings Moscow Valovaya str., 26 Moscow Secondary Analysts Alexey Kobylyanskiy (SK, KazAgro) Analyst +7 (495) 956-9901 Elena Ozhegova (Baiterek) Associate Director +7 (495) 956-9901 Vladimir Redkin (KMC) Senior Director +7 (495) 956-9901 Committee Chairperson Raffaele Carnevale Senior Director +39 02 87 90 87 203 Media Relations in Moscow: Julia Belskaya von Tell, Moscow, Tel: +7 495 956 9908, Email: julia.belskayavontell@fitchratings.com; [2016-05-11]