February 05, 2008 | Cbonds
|Standard & Poor's Ratings Services said today that it affirmed its 'BB' long-term rating on the Mortgage Guarantee Fund of Kazakhstan (JSC) (MGFK). At the same time, the 'kzA+' Kazakhstan national scale rating was affirmed. At the same time, both ratings were removed from CreditWatch with negative implications, where they had been placed on Oct. 2, 2007, and Oct. 9, 2007, respectively, following the lowering of the ratings on the Republic of Kazakhstan (foreign currency BBB-/Stable/A-3; local currency BBB/Stable/A-3; Kazakhstan national scale 'kzAAA'). The outlook is stable.|
"The CreditWatch removal and affirmation are based on stronger support from the state in the view of current potential difficulties in the real estate market and reiteration of the company's critical role in the implementation of the state-supported housing construction program," said Standard & Poor's credit analyst Felix Ejgel.
The ratings on MGFK, which is 100% controlled by Ministry of Finance and the National Bank, reflect its short track record; weak and deteriorating financial performance, arising from the need to increase personnel spending; volatile returns on investments; and a limited scale of operations.
Offsetting these constraints are the support MGFK receives from the Kazakh government and the company's sound liquidity.
At Jan. 1, 2008, MGFK had no debt.
"We expect that strong ongoing explicit support from the central government and a comfortable risk-to-capital ratio will help MGFK withstand the potential emergence of defaults on loans guaranteed by the fund," said Mr. Ejgel.
Although MGFK has not been called on its guarantees so far, this could occur with the current pressure on the financial sector as well as the maturing of the mortgage market in Kazakhstan. The ratings on MGFK will likely follow the trend of the ratings on the sovereign.
If the Kazakh government enhances support to the company and endorses the company's long-term strategy to reinforce the company's near-monopoly position in the market, it could result in a positive rating action.
If the company does not manage its business as expected, however, and the state does not provide for additional increases to the company's capital in its medium-term program, the ratings could come under pressure.
|Full company name||Mortgage Guarantee Fund of Kazakhstan JSC (MGFK)|
|Country of risk||Kazakhstan|