Moody's assigned Baa2 rating to Kazakhstan Mortgage Company

/REUTERS, New-York, May 31, 05/ - Moody's Investors Service has assigned a Baa2 local currency long-term issuer rating to Kazakhstan Mortgage Company. The outlook is stable. According to Moody's, the rating assigned to Kazakhstan Mortgage Company (KMC) takes into account the important role it is playing as the sole state-owned mortgage company in the country - and in particular, as the government's financial agent in the implementation of the state programme for housing construction in Kazakhstan - as well as the relatively low-risk profile of its portfolio of mortgages, which may be sold back to the originating Kazakhstani banks in the event of credit quality deterioration. KMC has a specific economic mandate from the government with a mission to catalyse the development of domestic housing finance, a priority sector for the state, since a large part of the electorate is underprovided with residential premises. According to Moody's, the rating incorporates a high likelihood of support for KMC from the authorities in the event of need. The rating is, however, constrained by the company's relatively short track record, and by uncertainties associated with its ambitious medium-term growth plans. As KMC thus far has only conducted operations in the domestic currency, its issuer rating pertains only to local currency obligations, does not reflect any transfer risk and is therefore neither constrained by the Baa3 foreign currency deposit ceiling for Kazakhstan, nor directly comparable with other published foreign currency ratings of Kazakhstani financial institutions. The rating also applies to KMC's senior unsecured local currency obligations; any collateralised debt would need to be rated individually, and may require an upward notching from the Baa2 senior unsecured level. The outlook for the Baa2 local currency issuer rating is stable, because in the event of a potential one-notch upgrade for the implicit support provider's (i.e. Republic of Kazakhstan's) local currency bond rating - which carries a positive outlook - KMC's Baa2 rating would still be unaffected, given the assumed levels of support and the company's dependence on the government. KMC is wholly owned by the Ministry of Finance of Kazakhstan. It is headquartered in Almaty, and has a network of 15 domestic representative offices. KMC's business model was adapted from Fannie Mae (USA) and Cagamas Berhad (Malaysia). The company acquires residential mortgages from a range of local commercial banks and private-sector mortgage and finance companies, providing liquidity for their mortgage lending programmes. KMC finances its activities through collateralised debt issuance in the domestic market. KMC reported total assets of KZT29.4 billion (US$219 million) and capital of KZT3.1 billion (US$23.9 million) under IFRS at 31 December 2004. [2005-06-01]