(The following statement was released by the rating agency)
MOSCOW, May 07 (Fitch) Fitch Ratings has affirmed KazAgro
Holding JSC's (KazAgro) Long-term foreign currency Issuer
Default Rating (IDR)
at 'BBB' and its Long-term local currency IDR of 'BBB+' and
removed them from
Rating Watch Negative (RWN). The agency has also affirmed
foreign currency IDR at 'F3'.
Fitch has also affirmed the 'BBB' Long-term foreign currency
rating of KazAgro's
senior unsecured USD1bn eurobond issue due 2023 (ISIN
XS0934609016) and removed
it from RWN. At the same time Fitch has also published the
Long-term foreign currency rating of KazAgro's upcoming
eurobond issue of up to
an equivalent of EUR600m.
KEY RATING DRIVERS
The removal of the Rating Watch reflects receding risks that the
share of market
funding will consistently overshoot above 50% of total at the
expense of state
funding. Market funding above the 50% level would have widened
differential with Kazakhstan (BBB+/A-/Stable), the 100% owner of
KazAgro, to two
notches. KazAgro was placed on RWN on 8 April 2014.
Following information received by the company, as well as
audited statements for
2013 Fitch estimates that Kazagro's market funding will be at
about 40% of total
over the medium term, declining from a spike to 47% in 2014
subsequent to the
upcoming issue of the eurobond of up to EUR0.6bn. The share of
funding was close to 100% when Fitch first rated the issuer in
2013. Part of the
upcoming bond will refinance a USD200m bank loan.
The change in the funding structure was also partly caused by
the Kazakhstan tenge (KZT) by about 20% in February 2014 that
led to a sharp
increase of foreign currency-denominated market debt in KZT
terms versus stable
local currency-denominated state-originated funding.
The agency treats equity (share capital), loans from the
KZT120bn loan from the National Fund as state-originated
funding, and loans from
third parties as market debt.
KazAgro acts as the government's agent in implementing the
policy. The agricultural sector is of high importance to the
nation in terms of
grain exports, production, employment and social issues.
Fitch rates KazAgro based on a top-down approach under its
criteria, taking into
account continuous state support in the form of equity
budget loans and other state- originated funding. Fitch expects
will continue to benefit from regular equity injections and
access to subsidised
government loans. In this respect the government is providing
equity injections to KazAgro to cover the KZT depreciation
losses estimated at
At end-April 2014, KazAgro's foreign currency debt was USD1.2bn,
USD645m placed in foreign currency bank accounts and deposits.
Positive rating action may result from evidence of more
support, including an explicit government guarantee on KazAgro's
upgrade of the Republic of Kazakhstan could also trigger a
Negative rating action could be triggered if market debt becomes
funding source for KazAgro on a sustained basis, signalling a
long-term shift in
the company's financing approach. A negative rating action on
the Republic of
Kazakhstan would also be reflected in KazAgro's rating.
A credit analysis on KazAgro is available at
Fitch Ratings CIS Ltd
26 Valovaya Street
+7 495 95699 80
+7 495 95699 01
+39 02 87 90 87 203
Media Relations: Julia Belskaya von Tell, Moscow, Tel: +7 495
956 9908, Email:
firstname.lastname@example.org; Peter Fitzpatrick,
London, Tel: +44 20
3530 1103, Email: email@example.com.
Additional information is available at www.fitchratings.com.
Applicable criteria, 'Tax-Supported Rating Criteria', dated 14
August 2012 and
'Rating of Public Sector Entities Outside the United States',
dated 4 March
2014, are available at www.fitchratings.com.
Applicable Criteria and Related Research:
Tax-Supported Rating Criteria
Rating of Public-Sector Entities - Outside the United States
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