Fitch Ratings has assigned Kazakhstan's Joint Stock Company Sovereign Wealth Fund Samruk-Kazyna a Long-Term foreign currency rating of 'BBB+', Long-Term local currency rating of 'A-', National Long-Term rating of 'AAA(kaz)' and Short-term foreign currency rating of 'F2'.
The Outlooks on the Long-Term ratings are Stable.
Fitch has also assigned a Long-Term local currency rating of 'A-' and a National Long-Term Rating of 'AAA(kaz)' to the Fund's 23 senior unsecured domestic bond issues with total value of KZT1,090bn.
The ratings reflect Samruk-Kazyna's 100% state ownership and its status, in Fitch's view, as an extension of the government. They also reflect the strategic importance of the assets under control and its strong financial position. Fitch uses its public-sector entities rating criteria and applies a top-down approach in its analysis of the Fund.
According to the special law On Sovereign Wealth Fund, Samruk-Kazyna's activity is focused on improving the sovereign wealth of the Republic of Kazakhstan by increasing the efficiency and value of major national companies, fostering modernisation and diversification of the economy, improving the investment and entrepreneurship climate and promoting social responsibility.
The Fund holds 100% or majority stakes in Kazakhstan's strategic companies operating in key sectors of the economy such as oil and gas, electricity, mining, transportation and other (the group). The total consolidated assets of the group account for more than 50% of Kazakhstan's GDP. The group provides 27% of tax revenues, 6% of total employment and invests between 7%-10% of GDP per year. However, Fitch rates JSC Sovereign Wealth Fund Samruk-Kazyna as an entity and does not factor in the group's obligations although the government has used Samruk-Kazyna to channel funding to shareholding companies.
Fitch considers Samruk-Kazyna's strategic importance, its control and oversight by the government of Republic of Kazakhstan and the integration with the national budgetary system as highly supportive of Samruk-Kazyna's credit quality. Fitch considers the ability and willingness of Kazakhstan to extend extraordinary support as very high.
Samruk-Kazyna plays an important stabilisation and quasi-fiscal role in the national budgetary and financial systems. It was the principal operator of Kazakhstan's Stabilisation Plan for the economy and financial system for 2009-2010. Significant government funds have passed through Samruk-Kazyna since 2009 to assure the country's financial stability. Government funds were placed in substantial deposits in the banking system and converted into majority stakes in troubled banks.
Fitch notes that while Kazakhstan's and Samruk-Kazyna's standalone debt are low, the group's consolidated debt at end-2012 was KZT4.2trn (excluding loans from the government) equivalent to USD27.9bn or 14% of 2012 GDP. The largest borrowers are exporters with foreign currency income streams, reducing risks.
Fitch believes that Samruk-Kazyna's strategic importance implies that direct or indirect support would be highly likely if needed. Samruk-Kazyna has received a significant amount of government loans at subsidised interest rates and equity injections, as well as subsidised loans from the central bank and the national oil fund since inception in 2008.
These funds were mostly passed through to subsidiaries as part of the implementation of Samruk-Kazyna's quasi-fiscal and developmental roles.
Samruk-Kazyna's ratings mirror those of the sovereign. A positive rating action would result from an upgrade of Kazakhstan. Conversely, negative rating action on Kazakhstan or weakening of the Fund's links with the state would lead to a downgrade.