Fitch downgrades Astana Finance to “restricted default”

business and economy

Fitch downgrades Astana Finance to “restricted default”

By SRI ⋅ May 22, 2009 ⋅

(Fitch Ratings) - Fitch Ratings has today downgraded Kazakhstan-based JSC Astana Finance’s (AF) Long-term Issuer Default Ratings (IDR) to ‘RD’ (Restricted Default) from ‘CCC’, thereby resolving the Watch Negative (RWN) on the ratings.

The agency has also downgraded JSC Astana Finance Leasing (AFL), a subsidiary of AF, to ‘C’ from ‘CCC’. A full list of rating actions is provided at the end of this commentary.

The downgrade follows AF’s announcement yesterday that it has decided to suspend payments of interest and principal on its international obligations and to suspend principal payments on certain of its domestic obligations until it agrees and implements a restructuring of these obligations. AF’s IDRs will remain on ‘RD’ until it has completed the expected restructuring of its outstanding debt and, in Fitch’s opinion, is able to comply with new terms negotiated with its creditors, which may still follow receipt of financial support from the Kazakh authorities.

Fitch understands that AFL has so far not defaulted on any of its obligations, and hence its ratings have not been downgraded to ‘RD’. However, AFL’s ‘C’ Long- term IDR reflects the now very high probability that it will end up in default on guarantees it has made in respect of certain AF borrowings (for example the public bonds issued by Astana Finance BV) or be forced into some form of wider coercive debt exchange or restructuring of its liabilities.

AF was created in 1997 by the Municipality of Astana to facilitate development finance (loans, leasing and equity) for Astana, the capital of Kazakhstan, and for the surrounding Akmola region. It has since diversified geographically and into certain aspects of investment banking

Rating actions are as follows:

JSC Astana FinanceLong-term foreign currency IDR: downgraded to ‘RD’ from ‘CCC’; removed from RWNLong-term local currency IDR: downgraded to ‘RD’ from ‘CCC’; removed from RWNShort-term foreign currency IDR: downgraded to ‘RD’ from ‘C’National Long-term rating: downgraded to ‘RD’ from ‘B-(kaz))’; removed from RWNIndividual rating: downgraded to ‘F’ from ‘E’Support rating: affirmed at ‘5′ Support Rating Floor: affirmed at ‘No Floor’Senior unsecured debt: downgraded to ‘C’ from ‘CCC’; removed from RWN; Recovery Rating affirmed at ‘RR4′

Astana Finance Leasing Company JSCLong-term foreign currency IDR: downgraded to ‘C’ from ‘CCC’; remains on RWNLong-term local currency IDR: downgraded to ‘C’ from ‘CCC’; remains on RWNShort-term foreign currency IDR: ‘C’; placed on RWNNational Long-term rating: downgraded to ‘C(kaz))’ from ‘B-(kaz))’; remains on RWNSupport rating: affirmed at 5

Contact: James Longsdon, London, Tel: +44 207 417 4309.

Media Relations: Marina Moshkina, Moscow, Tel: +7 495 956 9901, Email: marina.moshkina@fitchratings.com; Hannah Warrington, London, Tel: +44 (0) 207 417 6298, Email: hannah.warrington@fitchratings.com.

Fitch’s rating definitions and the terms of use of such ratings are available on the agency’s public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch’s code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the ‘Code of Conduct’ section of this site.

Fitch’s Recovery Ratings (RR), introduced in 2005, are a relative indicator of creditor recovery on a given obligation in the event of a default. A broad overview of Fitch’s RR methodology as it relates to specific sectors, including a Case Study webcast, can be found at www.fitchratings.com/recovery.