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Moody's downgrades Astana Finance (Kazakhstan) to C from Ca

November 12, 2009 | Moody's Investors Service

Moscow, November 12, 2009 -- Moody's Investors Service has today downgraded
the long-term issuer and debt ratings of Astana Finance to C from Ca. The
issuer's Baseline Credit Assessment (BCA) has been lowered to 21 from 20 (on
a scale of 1 to 21, where 1 represents the lowest credit risk). All
long-term ratings carry stable outlook.

This rating action concludes Moody's review process which was initiated on
21 May and prompted by the issuer's default on its public debts.
Following the default, Astana Finance considered the restructuring of its
debts in the amount of around US$1.8 billion and has recently signed a
Memorandum of Understanding (MoU) with the Creditors' Committee, which
contains indicative terms to be offered to creditors in connection with a
proposed restructuring.

The MoU proposes that each type of creditor will be awarded a fixed basket
of debt and equity instruments, with different terms for different types of
creditors of the same subordination level. The domestic creditors have
already announced their objection to the suggested restructuring plan and
Moody's believes that this position may delay completion of the
restructuring process.

Based on the financial information, published by Astana Finance as of
end-August 2009, Moody's estimates that the potential losses for the
issuer's creditors will exceed 50% in view of the substantial impairment of
the issuer's assets (loan loss reserves accounted for about 33% of total
loans), which has led to significant negative equity to date.
Moody's also does not rule out the possibility of further deterioration of
the issuer's asset quality because of the company's weak underwriting
standards and still challenging economic environment in Kazakhstan. As a
result, Moody's estimates the net present value of Recovery Loan Notes,
proposed to the issuer's senior unsecured creditors (excluding holders of
tenge-denominated bonds and trade finance creditors) as low.

"Moody's believes that the likelihood of cash contributions from existing
shareholders, which would have increased the debt recovery for creditors, is
low. The likelihood of systemic support provision from Sovereign Wealth Fund
Samruk-Kazyna, which controls more than 25% of the company, is also low,"
says Maxim Bogdashkin, a Moody's Moscow-based analyst for Astana Finance.

Moody's previous rating action on Astana Finance was implemented on 21 May
2009 when its local and foreign currency debt ratings were downgraded to Ca
from B3 (and the BCA was lowered to 20 from 17). Concurrently, the long-term
ratings had been placed on review for further possible downgrade.

The principal methodology used in rating Astana Finance is "Revised
Methodology for Government Related Non-Bank Financial Institutions", which
can be found at www.moodys.com in the Rating Methodologies sub-directory
under the Research & Ratings tab. Other methodologies and factors that may
have been considered in the process of rating the company can also be found
in the Rating Methodologies sub-directory on Moody's website.

Headquartered in Astana, Astana Finance (Kazakhstan) reported total assets
of US$1.4 billion and total negative equity of US$589 million, according to
the company's preliminary unaudited consolidated IFRS statements as of
end-September 2009.

Company: Astana-finance

Full company nameJoint Stock Company "Astana-finance"
Country of riskKazakhstan
IndustryFinancial institutions

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