Moody's may upgrade long-term rating of Kazakhstan railroads

/REUTERS, London, October 18, 02/ - International rating agency Moody's Investor Service informed that it could reexamine towards upgrading the long- term rating of the issuer "Ва2", which had been assigned to the railroad monopoly Kazakhstan temir zholy. Decision of Moody's was connected with increasing in September of Kazakhstan money rating by two degrees at a time to the investment level "Ваа3". Below is the full text of the message of Moody's in English: "Moody's Investor Service today placed the Ba2 long term issuer rating of Kazakhstan Temir Zholy ("KTZ"), the national railway company of the Republic of Kazakhstan, on review for possible upgrade. The action reflects the upgrade of the Republic of Kazakhstan's foreign currency ceiling for bonds and of the rating of the government's foreign currency bonds to Baa3 from Ba2. The rating of KTZ is based on the critical economic dependence of the republic of Kazakhstan on the railway system and the 100% ownership of KTZ by the government. Therefore, the rating is related to the sovereign rating of the Republic. Moody's notes that while the rating is related to the sovereign rating, it is not explicitly linked to it and may over time move independently from adjustments in the debt rating of the republic. The review will focus on the strength of the relationship with the government and implied support going forward in light of the current restructuring of the company. KTZ in the past has been an integrated railway company owning the infrastructure and operating freight and passenger transportation services. Moody's notes that in the first stage of the restructuring plan the following measures have already been implemented: Reorganization of the Republican State Enterprise "Kazakhstan Temir Zholy" into a "Closed Joint Stock Company Kazakhstan Temir Zholy National Company" (100% owned by the government), change of structure, divestiture of auxiliary activities and the creation of a "Passenger Transportation Open Joint Stock Company" with 100% of shares owned by KTZ. Under the second stage it is supposed to develop the competitive market in auxiliary and freight transportation activities and to transfer the freight operations into a separate, government owned entity. The review will assess the impact of these changes as well as the influence of independent freight transporters on KTZ's position in transportation activities and the continued intention of the government to regulate tariffs and fees in a way that ensures that fees to be paid by operators for infrastructure access and lease of locomotives will cover all costs at KTZ including debt interest as well as provide profits for the company. The review will also assess the potential negative impact of the construction of new pipelines in Kazakhstan for oil and gas export on the relative significance of railway operations for the economy. Kazakhstan Temir Zholy, headquartered in Astana City, is the national railway company of the Republic of Kazakhstan". [2002-10-18]