7 Kazakh companies' credit rating outlook downgraded by S&P

Standard & Poor’s has revised the ratings outlooks of 7 Kazakhstan national companies from "Stable” to “Negative”, Tengrinews reports citing the rating agency.

S&P reviewed the ratings of Samruk-Kazyna, Development Bank of Kazakhstan, Damu Entrepreneurship Development Fund, KazAgro National Management Holding, KazMunaiGas, KazMunaiGas Exploration & Production and KazTransOil. The rating outlooks of all these companies were changed to “Negative”.

The forecasts have been revised due to the recent downgrade of Kazakhstan’s sovereign credit rating outlook from “Stable” to “Negative” due to decreased rates of GDP per capita growth. According to Standard & Poors analysts, effectiveness of the country's monetary policy and credibility of its financial policies both deteriorated. Moreover, a halt in the production at the Kashagan oil and gas field and a slowdown of the Russian economy also produce negative effects for the overall growth of the Kazakhstan economy.

S&P explained the logic behind the downgrade for all 7 companies.

“We equate the issuer credit ratings of Samruk-Kazyna Fund, Development Bank of Kazakhstan, Damu and KazAgro to the level of the sovereign credit rating, which reflects our view of an "almost certain" likelihood of them receiving timely and sufficiently extraordinary support from the government of Kazakhstan," S&P said.

According to analysts of the agency, KazMunaiGas rating reflects their expectations of “extremely high” likelihood of receiving timely and sufficient support from the government. It also reflects evaluation of KazMunaiGas' creditworthiness as "b +", its “critical role” for the country, relative autonomy of its management and decision-making, relatively large amount of debt and expectations of negative free cash flow. S&P said that “Negative” credit rating outlook of KMG reflected a similar outlook on the sovereign ratings.

The last two companies that received downgrades – KazMunaiGas Exploration & Production and KazTransOil – are subsidiaries of KazMunaiGas. “We consider KazMunaiGas Exploration & Production as the "key" and KazTransOil as "strategically important" subsidiary companies of KazMunaiGas. We believe that there is a "high" probability of both companies receiving timely and sufficiently extraordinary support from the government. Thus, the "negative" outlook on the ratings of KazMunaiGas Exploration & Production and KazTransOil suggests that we are not planning to assign them ratings above the rating of their parent company," S&P explained.

In the meantime, Kazakhstan’s sovereign long-term sovereign credit rating remains at BBB+ with a “Negative” credit-rating outlook. This means that the country’s credit rating may be downgraded if the government doesn't not take sufficient measures to improve the situation. According to S&P, improved monetary policies and resumption of oil and gas production at Kashagan are critical prerequisites for a better outlook.

By Dinara Urazova

Standard & Poor’s has revised the ratings outlooks of 7 Kazakhstan national companies from "Stable” to “Negative”, Tengrinews reports citing the rating agency.

S&P reviewed the ratings of Samruk-Kazyna, Development Bank of Kazakhstan, Damu Entrepreneurship Development Fund, KazAgro National Management Holding, KazMunaiGas, KazMunaiGas Exploration & Production and KazTransOil. The rating outlooks of all these companies were changed to “Negative”.

The forecasts have been revised due to the recent downgrade of Kazakhstan’s sovereign credit rating outlook from “Stable” to “Negative” due to decreased rates of GDP per capita growth. According to Standard & Poors analysts, effectiveness of the country's monetary policy and credibility of its financial policies both deteriorated. Moreover, a halt in the production at the Kashagan oil and gas field and a slowdown of the Russian economy also produce negative effects for the overall growth of the Kazakhstan economy.

S&P explained the logic behind the downgrade for all 7 companies.

“We equate the issuer credit ratings of Samruk-Kazyna Fund, Development Bank of Kazakhstan, Damu and KazAgro to the level of the sovereign credit rating, which reflects our view of an "almost certain" likelihood of them receiving timely and sufficiently extraordinary support from the government of Kazakhstan," S&P said.

According to analysts of the agency, KazMunaiGas rating reflects their expectations of “extremely high” likelihood of receiving timely and sufficient support from the government. It also reflects evaluation of KazMunaiGas' creditworthiness as "b +", its “critical role” for the country, relative autonomy of its management and decision-making, relatively large amount of debt and expectations of negative free cash flow. S&P said that “Negative” credit rating outlook of KMG reflected a similar outlook on the sovereign ratings.

The last two companies that received downgrades – KazMunaiGas Exploration & Production and KazTransOil – are subsidiaries of KazMunaiGas. “We consider KazMunaiGas Exploration & Production as the "key" and KazTransOil as "strategically important" subsidiary companies of KazMunaiGas. We believe that there is a "high" probability of both companies receiving timely and sufficiently extraordinary support from the government. Thus, the "negative" outlook on the ratings of KazMunaiGas Exploration & Production and KazTransOil suggests that we are not planning to assign them ratings above the rating of their parent company," S&P explained.

In the meantime, Kazakhstan’s sovereign long-term sovereign credit rating remains at BBB+ with a “Negative” credit-rating outlook. This means that the country’s credit rating may be downgraded if the government doesn't not take sufficient measures to improve the situation. According to S&P, improved monetary policies and resumption of oil and gas production at Kashagan are critical prerequisites for a better outlook.

By Dinara Urazova

Samruk Kazyna S&P rating news KazMunaiGas Kazakhstan Kazakh KazAgro