December 12, 2005 | Cbonds
|Standard & Poor's Ratings Services said that it assigned its 'BB' long-term foreign currency counterparty credit rating to the Mortgage Guarantee Fund of Kazakhstan (JSC) (MGFK). The outlook is stable. At the same time, a 'kzA+' Kazakhstan national scale rating was assigned. |
"The ratings on MGFK reflect the start-up nature of the company, whose business is focused on the provision of mortgage guarantees in Kazakhstan," said Standard & Poor's credit analyst Felix Ejgel. "The Kazakh mortgage sector is immature, its growth is difficult to predict, and there is no data available on mortgage default rates nationally".
The risks are partially mitigated by the support MGFK receives from the Republic of Kazakhstan (foreign currency, BBB-/Stable/A-3; local currency, BBB/Stable/A-3; national scale kzAAA), its strong liquidity, and absence of debt at present.
Standard & Poor's rating approach for MGFK uses its government-supported entity criteria. Viewing the company as a public policy-based entity, Standard & Poor's has applied a top-down rating approach in assessing the credit quality of MGFK, which is based on the support that it receives from the national government. The absence of a liquidity mechanism or an explicit state guarantee for the company's debts, as well as uncertainty regarding the company's policy role in the longer term explains the three-notch difference between the ratings on MGFK and those on the Republic of Kazakhstan.
In the medium term, Standard & Poor's does not expect MGFK's currently strong liquidity to decrease significantly and also expects that the company will continue to receive state support.
"We will monitor the key performance statistics in MGFK's developing portfolio, such as default rates and fluctuations in house prices and values, which could impact the company's stand-alone credit quality, and the incentives for government support," added Mr. Ejgel.
"Should the rate of business growth be close to the company's expectations and legislative changes reinforce MGFK's near-monopoly position in the market, the rating may be raised. If the company does not manage to earn enough income to cover its operating expenses, however, and the business does not grow as expected, the ratings could come under pressure".
|Full company name||Mortgage Guarantee Fund of Kazakhstan JSC (MGFK)|
|Country of risk||Kazakhstan|