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KazMunayGas's S&P rating unaffected by potential full acquisition of KMG EP
Central Asia | business | 15:36, 31 July 2014 | 595

AKIPRESS.COM - aaf477fffa47e38537afe7f5ee1b6eba Standard & Poor's Ratings Services said July 30 that its ratings on Kazakh oil company KazMunayGas NC JSC and KazMunaiGas Exploration Production JSC are unchanged following the preliminary approach by KMG to the independent directors of its 63%-owned subsidiary KMGEP about a possible offer to acquire the remaining outstanding shares in KMGEP.

"We understand that this is only a preliminary approach; KMG has not made a final offer. If the deal proceeds and the acquisition is adequately refinanced, we expect that the transaction would not affect our current ratings on KMG and KMGEP. KMG's interest in fully acquiring KMGEP supports our view of KMGEP as a core subsidiary of KMG, a government-controlled vertically integrated oil company"

"As per our methodology, our rating on KMGEP is equalized with the rating on the parent. Our rating on KMG continues to reflect our expectation of an "extremely high" likelihood of timely and sufficient extraordinary government support from Kazakhstan. Should the transaction proceed, we currently anticipate that it would not affect KMG's stand-alone credit profile, which we currently assess at 'b+'"

"Although the offer may increase short-term liquidity needs at the parent level, we project that liquidity and leverage would remain manageable. At this stage, KMG has indicated an offer price of about $2.8 billion for all the outstanding shares. This may increase KMG's gross debt at least temporarily, but the impact is offset by access to large cash balances at KMGEP of $4.15 billion and essentially no debt as of March 31, 2014"

"Currently, we don't net this cash from KMG's debt, because it is at the subsidiary level and not directly accessible for the parent. Under Standard & Poor's policies, only a Rating Committee can determine a Credit Rating Action (including a Credit Rating change, affirmation or withdrawal, Rating Outlook change, or CreditWatch action). This commentary and its subject matter have not been the subject of Rating Committee action and should not be interpreted as a change to, or affirmation of, a Credit Rating or Rating Outlook."

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