S&P has upgraded outlook of Kazakhstan railway rating

/REUTERS, London, October 7, 02/ - On Monday international agency Standard & Poor's Ratings Services changed outlook of the rating of Kazakhstan railway monopoly - Temir Zholy - to "positive" from "stable". At this, long-term rating of borrowings in foreign and national currency was confirmed by the agency on the level "BB". Among reasons of outlook changing S&P calls auspicious outlook of sovereign Kazakhstan ratings. "The ratings reflect the lack of regulatory transparency, the low quality of KTZ's fixed assets and the need for significant investment in the rail sector, the possible effects of restructuring, and the threat of competition to some of KTZ's revenue streams in the longer term", - says the press-release of S&P. Below is the text of S&P's message in English: (The following statement was released by the rating agency) LONDON, Oct 7 - Standard & Poor's Ratings Services said today it revised its outlook on Kazakhstan Temir Zholy (KTZ), Kazakhstan's integrated monopoly railway company, to positive from stable, following a review of KTZ's stand-alone business and financial profile. The outlook revision also reflects the positive outlook on the Republic of Kazakhstan (local currency BB+/Positive/B; foreign currency BB/Positive/B). At the same time, Standard & Poor's affirmed its double-'B' local and foreign- currency long-term issuer credit ratings on KTZ. "The ratings reflect the lack of regulatory transparency, the low quality of KTZ's fixed assets and the need for significant investment in the rail sector, the possible effects of restructuring, and the threat of competition to some of KTZ's revenue streams in the longer term," said Standard & Poor's Infrastructure Finance credit analyst Mikhail Galkin. These weaknesses are offset by 100% state-ownership, the group's dominant position in both freight and passenger transportation in Kazakhstan, continuing improvement in the group's commercial performance, comparatively low debt leverage, KTZ's strategic importance to the national economy, and a close working relationship with the Kazakhstan government. The government appoints the management, regulates the company's tariffs, and guarantees about 70% of the group's total outstanding debt. Standard & Poor's assesses the implications of this in accordance with its criteria for government- supported entities. "KTZ is considered to be a policy-based institution, with a credit rating linked to that on Kazakhstan, but not necessarily equalized," said Mr. Galkin. KTZ is an integrated Kazakh railway operator 100%-owned by the Kazakhstan government, with sales of more than $1 billion in 2001. The group operates 13,600 kilometers of track, more than 1,900 locomotives, and up to 77,000 cars. The group's assets include some repair and maintenance facilities. [2002-10-07]