S&P downgrades Kazakhstan Temir Zholy

S&P said it lowered the long-term corporate ratings on Kazakhstan Temir Zholy and its core subsidiary, JSC Kaztemirtrans, to BB- from BB.

S&P also said it lowered the Kazakhstan national scale ratings on these entities to kzBBB+ from kzA.

The outlook is negative.

The agency also said it lowered the ratings on Kazakhstan Temir Zholy’s senior unsecured bonds, including those issued by its financing subsidiary, Kazakhstan Temir Zholy Finance BV, to BB- from BB.

The downgrades primarily reflect the diminished likelihood that the Kazakhstan government would provide support to Kazakhstan Temir Zholy if needed, S&P explained.

This was exhibited by the government’s tolerance for the sharp deterioration of Kazakhstan Temir Zholy's stand-alone credit quality since the beginning of 2015, the agency said.

The government did not provide the funds to reduce its leverage and the company’s adjusted debt-to-EBITDA ratio increased to about 8.6x at end-2015 from about 3.4x at end-2014, S&P said.

Government oversight also may not be sufficient to monitor debt repayments at all levels of the group, notably within the smaller subsidiaries, which may have material amounts of debt service, the agency added.

The ratings also consider the company’s strong market position in Kazakhstan and its exposure to commodity traffic volatility, S&P said.

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