News Column

Fitch rates KazAgroFinance's upcoming local bonds 'BBB-'

June 18, 2014



Fitch Ratings has assigned Kazakhstan-based KazAgroFinance's 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.

RATING SENSITIVITIES

KAF's ratings are likely to move in tandem with those of the sovereign and KazAgro.

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-'


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Source: AKIpress News Agency (Kyrgyz Republic)


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