Baku, Azerbaijan, Feb. 26
By Elena Kosolapova - Trend:
Standard & Poor's Ratings Services lowered its long- and short-term issuer credit ratings on KazAgro National Management Holding (KazAgro Holding) to 'BB+/B' from 'BBB-/A-3'. The outlook on the long-term ratings is negative, the agency said Feb. 25.
The agency also lowered the Kazakhstan national scale ratings on KazAgro to 'kzAA-' from 'kzAA'.
The rating action reflects the downgrade of Kazakhstan on Feb. 17.
S&P assesses the likelihood of extraordinary government support to the consolidated KazAgro group as almost certain. This is based on our view of the group's:
• Integral link with the government. The state owns 100% of the holding company, which in turn fully owns its subsidiaries.
• Critical public policy role as the government's primary vehicle for providing financial support to and developing the agricultural sector and rural areas.
Consequently, the group credit profile (GCP) is now 'bbb-', equalized with the sovereign credit rating on Kazakhstan. The GCP reflects the creditworthiness of the consolidated operations group, taking into account our view of the likelihood of extraordinary government support.
S&P believes, however, that while the holding company's creditworthiness is closely tied to that of the consolidated group, it is marginally weaker than the group's. Correspondingly, our ratings on KazAgro Holding are one notch lower than the GCP. This is because we consider KazAgro to be a non-operating holding company. Consequently, the government's incentives to provide extraordinary support to the parent company in a stress scenario could potentially be weaker as compared to some of the Holding's operating subsidiaries.
The negative outlook mirrors that on the sovereign. S&P would likely revise the outlook on KazAgro if we took a similar action on the sovereign. Other things equal, a one-notch downgrade of our long-term ratings on Kazakhstan could lead to a two-notch downgrade of our ratings on KazAgro Holding.
S&P could also lower the ratings over the next 12 months if we saw signs of waning government support to the group. In addition, we could lower the ratings if we perceived the role of KazAgro Holding for the government as reducing in contrast to the role of the overall group.
S&P could consider an upgrade if we perceived that the holding company's role for the government and its relative importance within the group had increased.
KazAgro holding includes Food Contract Corporation, KazAgroProdukt, KazAgroFinance, Agrarian Credit Corporation, Fund for Financial Support of Agriculture, KazAgroGarant and KazAgroMarketing.