Baku, Azerbaijan, Feb 12
By Elena Kosolapova - Trend: International Rating Agency Fitch Ratings has placed Kazakhstan-based JSC Samruk-Energy's ratings, including its Long-term foreign currency Issuer Default Rating of 'BBB', on Rating Watch Negative (RWN), the agency reported on Feb. 12.
"The RWN reflects potential diminishing of state support for Samruk-Energy due to a reduction of the share of state-guaranteed debt in the company's total indebtedness. The RWN also reflects uncertainty regarding the state's willingness to support the company's sound credit metrics while encouraging its acquisitive and capital-intensive strategy," the company said.
Following the determination of the funding structure for a potential acquisition, Fitch will re-assess the ties between Samruk-Energy and its ultimate sole shareholder, the Kazakh state. Any weakening of ties may result in a widening of notches between the state's (BBB+/Stable) and the group's ratings.
If Samruk-Energy's potential acquisition of a 50 percent stake in LLP Ekibastuz GRES-1 is to be fully debt-funded, it would result in sustained deterioration of the company's credit metrics, despite an expected substantial contribution of the acquisition target to the group's EBITDA. Based on Fitch's forecasts this could result in the leverage covenant of 4.5x stipulated in the EBRD loan documentation being breached in 2014.
Fitch would view funding for this acquisition as a test of the Kazakh government's willingness and ability to provide timely tangible support to Samruk-Energy and maintain its sound credit metrics. This is particularly important in light of the company's pursuit of acquisitive and capital-intensive strategy and its limited financial flexibility. Fitch believes a fully debt-funded acquisition of Ekibastuz GRES-1 would signal the state's reduced willingness to provide financial support and may also serve as an indication of a preferred funding structure for other potential acquisitions.
Kazakh Sovereign Wealth Fund Samruk-Kazyna (BBB+/Stable), which is 100- percent state-owned and is a sole direct shareholder of Samruk-Energy, is expected to purchase a 50 percent stake in LLP Ekibastuz GRES-1 from Kazakhmys for 200 billion tenge (163.90 tenge =$1) provided by the state and to further transfer this asset to Samruk-Energy. Two options for financing this acquisition are being considered - an equity contribution to Samruk-Energy (potentially through preferred share issue) or debt funding by issuing long-term bonds under favourable terms to be purchased by Samruk-Kazyna.
Negative sovereign rating action and diminishing level of state support could lead to negative rating action.
Fitch's sensitivities do not currently anticipate developments with a material likelihood, individually or collectively, leading to an upgrade. Nonetheless, positive sovereign rating action, increase of the level of state support (e.g. state guarantees for a larger portion of the company's debt) and material reduction in the structural and contractual subordination in the group's debt structure along with adherence to a clearly defined debt management policy could lead to a positive rating action.