MOSCOW (Standard & Poor's) Sept. 16, 2009--Standard & Poor's Ratings Services said today that it had affirmed its 'BB' long-term issuer credit and 'kzA+' Kazakhstan national scale ratings on Kazpost (JSC), the state-owned national postal operator in Kazakhstan. The outlook is stable.
The ratings were removed from CreditWatch with negative implications, where they had been placed on June 16, 2009. Before the CreditWatch placement, the outlook was stable.
"The removal from CreditWatch and affirmation reflect our expectations of a "high" likelihood that the Kazakh government will provide timely and sufficient extraordinary support to the company in case of financial distress," said Standard & Poor's credit analyst Boris Kopeykin.
The ratings continue to be constrained by Kazpost's plans to increase its unguaranteed debt and its rising reliance on its own funds to finance its massive capital-investment program.
In accordance with our criteria for government-related entities, our view of a "high" likelihood of extraordinary government support is based on our assessment of Kazpost's:
"Important role" as a mail delivery and pension payments provider for the government. Kazpost provides about 50% of national mail services and delivers more than 45% of pensions and social assistance payments in the country. Kazpost has a near-monopoly in rural areas (where 43% of Kazakhstan's population lives) with its 3,500 outlets including 2,900 outlets in rural areas. As the national postal operator, Kazpost must provide universal mail services throughout Kazakhstan and is the exclusive deliverer of high-value or top-secret goods for the Kazakh government. The company also participates in various state programs, including an e-government project, and manages the issuance of postage stamps. We also base this opinion on the track record of support to Kazpost in the form of recurring capital injections.
"Very strong" link with Kazakhstan's government. Kazakhstan's government wholly owns Kazpost through Samruk-Kazyna holding, and privatization is not on the agenda. The government tightly monitors Kazpost's activities through Samruk-Kazyna. The only outstanding loan that Kazpost currently has is guaranteed by the government, although the government does not plan to guarantee the company's future borrowings.
The stable outlook on Kazpost mirrors that on the Republic of Kazakhstan (foreign currency BBB-/Stable/A-3; local currency BBB/Stable/A-3; Kazakhstan national scale rating 'kzAAA'). We expect the government to continue to expand Kazpost's capital, although the exact amount of injections for 2010-2012 might fluctuate. Furthermore, we do not expect any changes in the policy and regulatory framework that would challenge our expectations of a "high" probability of timely and sufficient support to Kazpost from the government in case of financial distress.
"A negative rating action on Kazakhstan, or a change in our expectations of extraordinary support to the company could pressure the ratings on Kazpost," said Mr. Kopeykin.
A faster-than-now-expected accumulation of unguaranteed debt, or lower-than-now-planned financial results could also result in ratings downside.
Ratings upside could result from a stronger sovereign credit profile, and/or a higher probability of extraordinary support, which we do not currently expect. An upgrade might also follow a strengthening of the company's stand-alone credit profile, including higher ongoing support from the government in the form of capital injections and consequently lower-than-now-expected borrowings in 2009-2012.