(Repeat for additional subscribers)
June 18 (The following statement was released by the rating agency)
Fitch Ratings has assigned Kazakhstan-based
KazAgroFinance's (KAF) upcoming issue of KZT-denominated bonds an expected
Long-term local currency rating of 'BBB-(EXP)' and an expected National
Long-term rating of 'AA(kaz)(EXP)'. The planned issue amount is KZT17bn and the
tenor is 8.5 years. The final rating is contingent on the receipt of final
documents conforming to information already provided.
KEY RATING DRIVERS
The bonds are rated at the same level as KAF's Long-term local currency Issuer
Default Rating (IDR) of 'BBB-' and National Long-term Rating of 'AA(kaz)'. KAF's
IDRs and National Long-term Rating in turn reflect the likelihood of support it
may receive, if needed, from Kazakh authorities (through KazAgro National
Management Holding JSC, BBB/Stable). This is based on the track record of
capital injections, the low cost of potential support, KAF's status as a
material subsidiary of KazAgro and the significant risks of reputational and
market access damage in case of KAF's default.
The two-notch differential between KAF's 'BBB-' IDR and that of the Kazakh
sovereign's 'BBB+' reflects (i) KAF's less prominent policy role as a
development institution and lesser importance for the country's economy and
financial system relative to other government-owned institutions in Kazakhstan;
and (ii) the company's indirect government ownership, which may in some
scenarios impact the timeliness of support. KAF's vulnerable asset quality and
growth plans also mean that its leverage may over time increase significantly
from the current low level.
KAF's ratings are likely to move in tandem with those of the sovereign and
Fitch may downgrade KAF's ratings if the agency believes that the government's
support propensity in respect to KAF has weakened; for example, if the company's
financial profile deteriorates considerably as a result of asset quality
worsening or increased leverage without support being provided.
KAF's ratings are as follows:
Long-term foreign and local currency IDRs: 'BBB-', Outlook Stable
Short-term foreign currency IDR: 'F3'
National Long-term rating: 'AA(kaz)', Outlook Stable
Support Rating: '2'
Support Rating Floor: 'BBB-'