Fitch affirms Kazakh KazAgro at 'BBB'
The International Rating Agency Fitch Ratings has affirmed Kazakh KazAgro National Managing Holding JSC's Long-term foreign currency Issuer Default Rating (IDR) at 'BBB' and its Long-term local currency IDR of 'BBB+' and removed them from Rating Watch Negative (RWN).
The agency has also affirmed KazAgro's Short-term foreign
currency IDR at 'F3', Fitch reported on April 8.
Fitch has also affirmed the 'BBB' Long-term foreign currency rating
of KazAgro's senior unsecured $1 billion eurobond issue due 2023
(ISIN XS0934609016) and removed it from RWN. At the same time Fitch
has also published the expected 'BBB(exp)' Long-term foreign
currency rating of KazAgro's upcoming eurobond issue of up to an
equivalent of 600 million euro.
"The removal of the Rating Watch reflects receding risks that the
share of market funding will consistently overshoot above 50
percent of total at the expense of state funding," the agency
said.
Market funding above the 50 percent level would have widened the
rating differential with Kazakhstan (BBB+/A-/Stable), the 100
percent owner of KazAgro, to two notches. KazAgro was placed on RWN
on 8 April 2014.
Following information received by the company, as well as audited
statements for 2013 Fitch estimates that Kazagro's market funding
will be at about 40 percent of total over the medium term,
declining from a spike to 47 percent in 2014 subsequent to the
upcoming issue of the eurobond of up to 0.6 billion euro.
KazAgro acts as the government's agent in implementing the state's
agriculture policy. The agricultural sector is of high importance
to the nation in terms of grain exports, production, employment and
social issues.
Fitch rates KazAgro based on a top-down approach under its
criteria, taking into account continuous state support in the form
of equity injections, subsidised budget loans and other state-
originated funding. Fitch expects that KazAgro will continue to
benefit from regular equity injections and access to subsidised
government loans.
Positive rating action may result from evidence of more formalised
state support, including an explicit government guarantee on
KazAgro's debt. An upgrade of the Republic of Kazakhstan could also
trigger a positive rating action.
Negative rating action could be triggered if market debt becomes
the major funding source for KazAgro on a sustained basis,
signalling a long-term shift in the company's financing approach. A
negative rating action on the Republic of Kazakhstan would also be
reflected in KazAgro's rating.