BAKU, Azerbaijan, Nov. 6
By Nargiz Sadikhova - Trend:
Fitch Ratings has affirmed KazAgro National Management Holding JSC's (KazAgro) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) at 'BBB' with Stable Outlook, Trend reports citing the Fitch.
The report said that affirmation reflects Fitch's view on the strong links between KazAgro and Kazakhstan (BBB/Stable). An upcoming reorganisation of national management holdings (NMHs) in Kazakhstan has led us to reassess the support rating factors for KazAgro. This results in a score of 55, versus 45 previously, which continues to warrant its rating equalisation with the sovereign IDRs.
“Kazakhstan injected 132.9 billion tenge ($306.2 million) into KazAgro in 2018-2019 and regularly provided subsidies to support its operations. KazAgro also benefits from indirect support as state or quasi-state funds represent more than half of its bondholders,” the report said.
The assessment is based on Fitch's view that a distress of KazAgro would materially endanger the provision of affordable lending to agricultural entities via on-lending to commercial banks and directly to agricultural businesses, given the lack of substitutes in the sector. KazAgro, through its subsidiaries, provides around 80 percent of loans in agriculture, as well as the bulk of agricultural leases in the country.
Support of agriculture has historically been one of the strategic priorities for the state, due to the large export capacity of this sector and its social importance. Agriculture employs more than 10 percent of the country's labor force and is the largest employer for the rural population. According to official statistics around 40 percent of the country's population resides in rural areas.
The reassessment to 'Very Strong' from 'Strong' is based on Fitch's view on KazAgro as a financial agent of the Kazakhstani government, which is in line with the assessment of others Kazakhstani NMHs, i.e. Baiterek and Sovereign Wealth Fund Samruk Kazyna JSC (BBB/Stable).
KazAgro is a frequent domestic market borrower and in the past has tapped international capital markets and borrowed from international financial institutions. The 'Very Strong' assessment for all NMHs reflects Fitch's assumption that a default of either entity would materially impair investor confidence in the credibility of the Kazakh government.
KazAgro is one out of three NMHs in Kazakhstan. It focuses on the development of agriculture and along with its subsidiaries provides financial and non-financial services to local agricultural producers. Its largest subsidiaries are Agrarian Credit Corporation (BBB-/Stable), which provides subsidised loans to agricultural entities and KazAgroFinance (BB+/Stable), which provides leasing services to farmers.
The operating model of the group is structured in such a way that the majority of debt is consolidated at the holding company, while the key earning assets are at the level of subsidiaries.