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Baiterek holding assigned 'BBB+/A-2' ratings, S&P says outlook negative

August 14, 2014

Standard & Poor's Ratings Services said that it assigned its 'BBB+/A-2' foreign and local currency counterparty credit ratings and its 'kzAAA' Kazakhstan national scale rating to 100% state-owned holding company National Management Holding Baiterek. The outlook is negative. The rating of the S&P reads: The ratings reflect our classification of Baiterek as a government-related entity (GRE) and our assessment that there is an "almost certain" likelihood that the government of Kazakhstan would provide timely and extraordinary support to Baiterek if it ran into financial difficulties. Baiterek has a clearly defined and strategic public policy role assigned by the government of Kazakhstan, very strong capitalization under our risk-adjusted capital (RAC) measure (with significant state capital injections planned), and strong liquidity. Partly offsetting these strengths are Baiterek's weak loss track record, with high levels of nonperforming loans (NPLs) at some of its subsidiaries compared with domestic commercial non-restructured banks, low core profitability, and concentrated wholesale funding.In accordance with our criteria for rating GREs, our view that there is "almost certain" likelihood of extraordinary government support for Baiterek is based on our assessment of:

Baiterek's "integral" link with the government, which fully owns the company and has committed to maintaining the capitalization of Baiterek and its subsidiaries. The Prime Minister is the chairman of the board of directors; and Baiterek's "critical" role, serving as the vehicle through which the government will implement its strategic development agenda by channeling government resources toward developing the non-commodity sectors of the economy.

In our view, this clear mandate establishes Baiterek's public policy importance, even though it was only recently created.

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Source: AKIpress News Agency (Kyrgyz Republic)

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