(The following statement was released by the rating agency)
Dec 24 - Standard & Poor's Ratings Services has today affirmed its 'BB+' issue rating on the
proposed $500 million (about Kazakhstani tenge 75 billion) notes of Kazakhstan state-owned
vertically integrated electricity utility Samruk-Energy JSC (BB+/Stable/B; Kazakhstan
national scale rating 'kzAA-'). The recovery rating of '4' on the proposed
notes remains unchanged.
The 'BB+' issue rating on the proposed $500 million notes is at the same level
as the corporate credit rating on Samruk. The recovery rating of '4' indicates
our expectation of average (30%-50%) recovery prospects in the event of a
payment default. The size of the issuance has increased to $500 million from
the $200 million originally envisaged. We understand that the majority of the
proceeds of the notes (about $420 million) will be utilized for capital
expenditures or acquisition spending.
Our opinion of the recovery prospects for the notes is supported by our view
that, in the event of default, the likely recovery for the noteholders would
hinge on the ability and willingness of the Kazakh government to negotiate
with creditors, rather than formal restructuring, given the implied sovereign
support and the strategic nature of Samruk-Energy's assets. However, the
recovery prospects are constrained by the unsecured nature of the notes and
our view of Kazakhstan as an unfavorable insolvency regime for creditors.
Given implied sovereign support and the strategic nature of Samruk-Energy's
assets, we believe it unlikely that the group's assets would be sold to repay
creditors. Therefore, in large part, we believe noteholder recoveries are
likely to depend on the ability and willingness of the Kazakh government to
reach a negotiated settlement in the event of default.
Following the increase in the size of the proposed notes issue, we now
estimate that the group's intrinsic enterprise value at default would need to
exceed KZT90 billion at the hypothetical point of default, based on our
waterfall assumptions, to cover more than 30% of the notes' principal and
prepetition interests. This is consistent with a recovery rating of '4'. We
assume that about KZT35 billion of prior-ranking claims, excluding enforcement
costs, would need to be covered before payment of about KZT157 billion of
unsecured debt claims that we assume would be outstanding at default. The
latter amount comprises the proposed KZT75 billion notes, as well as various
unsecured debt instruments.
RELATED CRITERIA AND RESEARCH
All articles listed below are available on RatingsDirect on the Global Credit
Portal, unless otherwise stated.
-- Kazakhstan-Based Samruk-Energy's Proposed Notes Assigned 'BB+' Issue
Rating And A Recovery Rating Of '4', Nov. 28, 2012
-- Kazakhstan State-Owned Vertically Integrated Electricity Utility
Samruk-Energy Rated 'BB+/B' And 'kzAA-'; Outlook Stable, Nov. 20, 2012
-- General Criteria: Rating Government-Related Entities: Methodology And
Assumptions, Dec. 9, 2010
-- Criteria - Corporates - Recovery: Criteria Guidelines For Recovery
Ratings On Global Industrials Issuers' Speculative-Grade Debt, Aug. 10, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Senior Unsecured Debt BB+
Recovery Rating 4