Azerbaijan, Baku, Dec. 24 / Trend E. Kosolapova/
Standard & Poor's Ratings Services has today affirmed its 'BB+' issue rating on the proposed $500 million (about 75 billion tenge) notes of Kazakhstan state-owned vertically integrated electricity utility Samruk-Energy. The recovery rating of '4' on the proposed notes remains unchanged.
"The 'BB+' issue rating on the proposed $500 million notes is at the same level as the corporate credit rating on Samruk. The recovery rating of '4' indicates our expectation of average (30-50 percent) recovery prospects in the event of a payment default," the agency said.
Standard & Poor's forecasts that the majority of the proceeds of the notes (about $420 million) will be utilized for capital expenditures or acquisition spending.
According to Standard & Poor's, the recovery prospects for the notes is supported by the fact that, in the event of default, the likely recovery for the noteholders would hinge on the ability and willingness of the Kazakh government to negotiate with creditors, rather than formal restructuring, given the implied sovereign support and the strategic nature of Samruk-Energy's assets.
"However, the recovery prospects are constrained by the unsecured nature of the notes and our view of Kazakhstan as an unfavorable insolvency regime for creditors," the agency said.
Given implied sovereign support and the strategic nature of Samruk-Energy's assets, Standard & Poor's believes it unlikely that the group's assets would be sold to repay creditors. Therefore, in large part, the agency believes noteholder recoveries are likely to depend on the ability and willingness of the Kazakh government to reach a negotiated settlement in the event of default.
Following the increase in the size of the proposed notes issue from the $200 million originally envisaged, Standard & Poor's now estimates that the group's intrinsic enterprise value at default would need to exceed 90 billion tenge at the hypothetical point of default, based on our waterfall assumptions, to cover more than 30 percent of the notes' principal and prepetition interests. This is consistent with a recovery rating of '4'.
Standard & Poor's assumes that about 35 billion tenge of prior-ranking claims, excluding enforcement costs, would need to be covered before payment of about 157 billion tenge of unsecured debt claims that the agency assumes would be outstanding at default. The latter amount comprises the proposed 75 billion tenge notes, as well as various unsecured debt instruments.
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