Standard & Poor’s estimates Samruk-Kazyna’s stand-alone credit profile (SACP) at ‘b+’. The key constraint on the ratings is the company’s high exposure to the relatively weak local banks, which themselves receive assistance from Samruk-Kazyna.
In our view, the situation in the Kazakh banking sector is improving, and the liabilities of the banks that defaulted have been appropriately restructured. Nevertheless, a high 42% of Samruk-Kazyna’s asset portfolio is in the form of equity stakes, loans to banks, and deposits, and these also form a significant share of the fund’s recurring income.
The stand-alone credit profiles of Samruk-Kazyna’s major subsidiaries are relatively weak. At the holding level, recurring income consists of dividends and interest. A significant part of the holding entity’s income is not paid in cash. For example, a considerable proportion of the interest on Samruk-Kazyna’s deposits with local banks is accumulated and used to repay Samruk-Kazyna’s liabilities with those banks. Similarly, the dividend from Samruk-Kazyna’s largest investment, KMG, is offset against a loan KMG extended to the holding company in mid-2010.
“Samruk-Kazyna’s SACP reflects our expectation that the company will continue to receive regular government support in the form of long-term loans and capital injections. Most of the holding entity’s debt is due to the government or to its subsidiaries. By contrast, the subsidiaries’ debt is mostly to third parties, but these creditors have no recourse to Samruk-Kazyna,” S&P said.
“The stable outlook reflects our outlook on ratings on the Republic of Kazakhstan and our expectation that our assessments of Samruk-Kazyna’s critical role in the economy and integral link with the government are unlikely to change.”
“We could raise or lower the ratings on Samruk-Kazyna if the ratings on the Republic of Kazakhstan were raised or lowered. Any signs of weakening sovereign support, either because of deviation from Samruk-Kazyna’s policy role or because of a weakening link with the government, may change our assessment of Samruk-Kazyna’s role, and of its link with the government, and this would result in downward pressure on the rating,” the agency said.