Fitch upgrades Kazakh Mortgage Company’s rating
Baku, Azerbaijan, Nov. 24
By Elena Kosolapova - Trend:
Fitch Ratings has upgraded Kazakhstan Mortgage Company's (KMC) long-term foreign currency issuer default rating (IDR) to 'BBB' from 'BBB-' and long-term local currency IDR to 'BBB+' from 'BBB', said the message of Fitch Nov.24.
The short-term foreign currency IDR has been affirmed at 'F3', and the outlooks on the long-term ratings are stable, according to the message.
Fitch has also upgraded the long-term local currency rating on KMC's outstanding senior debt to 'BBB+' from 'BBB' and the long-term local currency rating on the outstanding subordinated bonds to 'BBB' from 'BBB-'.
"The upgrade reflects KMC's strengthened strategic importance following its appointment as the priority provider of social rental housing under the state's Program for Regions' Development until 2020 and extended government support," said the message.
Consequently, Fitch has narrowed the notching from the republic of Kazakhstan (BBB+/Stable/F2) to one from two.
"KMC's ratings reflect the company's ultimate ownership by the government, its high strategic importance in social housing and strong control and oversight by the state," said the message.
However, the ratings also factor in moderate integration with the state as its financial flows and debt stock are not consolidated in any government bodies.
KMC's role in the state housing policy has grown in 2015 when the company was selected as the prioritized participant of Kazakhstan's Program for Regions' Development to 2020. Under this program, KMC is required to deliver about 1.5 million square meters of social rental housing across the republic until 2020.
To implement this program KMC has received subsidized loans worth 92.5 billion tenge from Baiterek in 2015 to be invested in social rental housing. This resulted in an increase of accumulated direct funding from state-owned institutions to about 160 billion tenge by late September 2015 from 67 billion tenge in late 2014.
Fitch views KMC's integration into the general government sector as moderate. The company has a separate budget and its debt is not consolidated in state debt.
An upgrade may result from an upgrade of the sovereign ratings provided that KMC's links to the government are unchanged, or from tighter integration with the sovereign, including an explicit government guarantee.
Changes to the legal status leading to a dilution of control or weakening of support by the sovereign could lead Fitch to widen the notching from the sovereign to two notches, resulting in a downgrade. A negative rating action on the Republic of Kazakhstan would also be reflected in KMC's ratings.
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