AKIPRESS.COM - Moody's Investors Service has assigned Baa3 long-term and P-3 short-term local and foreign currency issuer ratings to Baiterek National Management Holding, JSC (Baiterek).
The outlook on the ratings is stable. At the same time, Moody's assigns the Aaa.kz National Scale Issuer Rating to Baiterek.
Baiterek's ratings reflect the holding company's important role in promoting Kazakhstan's economic development. The rating also incorporates Baiterek's significant integration with the government, through the government's 100% ownership of the holding company and its involvement in Baiterek's business activities, including control over Baiterek's financial performance and approval of its key metrics.
Baiterek is a financial arm of the Government of Kazakhstan (Baa3, Stable), which uses the holding company to provide financial support to non-oil sectors of the economy through a number of development institutions that come under Baiterek's umbrella. The holding company was created by the President's law in 2013 to streamline the financing and management of existing key development institutions, which now come under its umbrella. It centralises the interaction between the subsidiaries and various government bodies, channels government funding to development institutions, systematises strategic development of institutions under its ownership and undertakes their operating and risk controls.
The holding company through its subsidiaries participates in the key government programmes for economic development and its consolidated assets account for 9% of GDP. Baiterek accounted for 43% of all long-term lending to non-oil sectors of the economy at the end of the first half of 2017, while 75% of mortgage loans were issued by its subsidiaries. Additionally, its subsidiaries provided 34% of all capital investments and 27% of all SME financing in Kazakhstan in the first half of 2017.
Baiterek's institutional framework encompasses strong links with the government, including through the involvement of high-ranking government officials in its strategic activities and monitoring. The high-ranking government and the President's administration officials dominate its Board of Directors (six members out of ten), which approves the organisation's development plans and controls its performance and risk position on a quarterly basis. In addition, the Ministry of Finance receives Baiterek's debt statements quarterly, while programme implementation reports are submitted to respective government bodies.
Moody's believes the Kazakhstan government would provide financial support to the holding company, if it were necessary, to avoid the significant damage that could otherwise result, in terms of 1) reputation; 2) reduced access to market funding for government-related entities; 3) impairment or disruption in the implementation of important government programmes; and 4) loss of control over major development institutions to creditors.
The stable outlook on Baiterek's ratings mirrors the stable outlook on Kazakhstan's sovereign bond rating and reflects the company's strong institutional and financial links with the Kazakhstan government.