Fitch places Kazakhstan's KazAgroFinance on Rating Watch Negative
International Rating Agency Fitch Ratings has placed Kazakh
KazAgroFinance's Long-term Issuer Default Ratings (IDRs) of 'BBB-'
on Rating Watch Negative (RWN), the agency reported on April
18.
Short-term foreign currency IDR: 'F3', placed on RWN
National Long-term rating: 'AA (kaz)', placed on RWN
Support Rating: '2', placed on RWN
Support Rating Floor: 'BBB-', placed on RWN
"The RWN on KazAgroFinance mirrors that on its parent KazAgro
National Managing Holding JSC (BBB/RWN), which in turn reflects
Fitch's concerns about KazAgro's intention to significantly
increase wholesale borrowings, as this may reduce the government's
support propensity for KazAgro and consequently KazAgroFinance,"
the agency said.
KazAgroFinance's IDRs, National Long-term and Support Ratings
factor in the likelihood of support the bank may receive, if
needed, from Kazakh authorities (through KazAgro), given the track
record of capital injections, the low cost of potential support,
KazAgroFinance's status as a material subsidiary of KazAgro and the
significant risks of reputational and market access damage in case
of KazAgroFinance's default.
At the same time, the current two-notch differential between
KazAgroFinance 's foreign currency IDR and that of the Kazakh
sovereign reflects KazAgroFinance '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 the company's indirect government
ownership, which may in some scenarios impact the timeliness of
support. KazAgroFinance's vulnerable asset quality and growth plans
also mean that its leverage may over time increase significantly
from the current low level.
Fitch expects to resolve the RWN on KazAgroFinance within six
months once the parent's RWN is resolved. In resolving the RWN on
KazAgroFinance, Fitch will consider the rating action on the
parent, as well as the role of KazAgroFinance in the group and the
implications of the increased market borrowings of KazAgro for the
government's support propensity towards KazAgroFinance.
Fitch may downgrade KazAgroFinance's ratings if the parent's
ratings are downgraded and the agency believes that support
propensity in respect to KazAgroFinance has weakened.
The affirmation of KazAgro's ratings and/or evidence that support
for KazAgroFinance has not materially deteriorated could result in
affirmation of KazAgroFinance's ratings.