Baku, Azerbaijan, May 9
By Elena Kosolapova - Trend:
International ratings agency Fitch Ratings has downgraded Kazakhstan public sector entities - JSC Sovereign Wealth Fund Samruk-Kazyna (SK) and JSC National Management Holding Baiterek's (Baiterek) long-term foreign currency IDRs to 'BBB' from 'BBB+', said the agency's message.
Meanwhile, Fitch has also downgraded KazAgro National management holding JSC (KazAgro) and Kazakhstan Mortgage Company's (KMC) long-term foreign currency IDRs to 'BBB-' from 'BBB'.
The rating actions follow Fitch's recent downgrade of Kazakhstan's long-term foreign currency IDR to 'BBB' from 'BBB+'.
SK's IDRs remain equalised with those of Kazakhstan, reflecting its strong links with the sovereign and high propensity of state support. This is evidenced by SK's special legal status, its strategic role as an extension of the government in managing its core assets, strong operational and financial integration with the government, and tight control by the latter along with maintenance of 100-percent state ownership.
Baiterek's IDRs remain equalised with the sovereign IDRs, which reflects the company's unchanged special legal status, its strategic importance for state policy on economic development and diversification, and strict state control. Fitch considers that the recently announced large-scale national privatisation programme will not weaken these major rating factors.
KazAgro's IDRs have been downgraded and a one-notch rating differential from Kazakhstan's ratings has been maintained, reflecting a "mid-range" degree of integration in light of market-originated funding. Unchanged special legal status, strategic importance for state policy on agriculture support and strict state control over the company underpin ongoing credit linkage with its sponsor.
KMC's IDRs remain one notch below the sovereign, which Fitch considers the company's ultimate sponsor, and reflects full ownership by the government through Baiterek, its high strategic importance in social housing and strong control and oversight by the state. The one-notch rating differential factors in a "mid-range" assessment of its integration with the state as KMC's financial flows and the fact that KMC's debt is not consolidated in any government bodies.
Positive rating action in regard to Samruk-Kazyna and Baiterek could result from an upgrade of Kazakhstan. Conversely, negative rating action on Kazakhstan or a weakening of the fund's links with the state would lead to a downgrade.
KazAgro's downgrade would follow the materialisation of diminishing propensity for support from the state as measured by a sustainable shift in the long-term funding structure in favour of market instruments, leading to widening of the rating differential with the sovereign to two notches. Negative rating action on Kazakhstan would also be reflected by KazAgro's rating.
An upgrade of KMC's ratings 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. Negative rating action on Kazakhstan would also be reflected by KMC's ratings.
Edited by SI
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