(The following statement was released by the rating agency)
Nov 14 -
Summary analysis -- JSC Kaztemirtrans ----------------------------- 14-Nov-2012
CREDIT RATING: BBB-/Stable/-- Country: Kazakhstan
Primary SIC: RAILROAD
Credit Rating History:
Local currency Foreign currency
24-Dec-2010 BBB-/-- BBB-/--
14-Jul-2006 BB+/-- BB+/--
We equalize the rating on Kazakhstan’s major freight wagon owner JSC Kaztemirtrans (KTT) with our rating on Kazakhstan’s national railway operator Kazakhstan Temir Zholy (KTZ; BBB-/Stable/--; Kazakhstan national scale kzAA/--/--), KTT’s 100% parent. The equalization of the rating reflects our view of an almost certain likelihood that KTZ would provide financial support to KTT, if needed. We base our view on the following:
-- KTT is 100% owned by KTZ. The KTZ group guarantees almost all of KTT’s debt;
-- KTZ views KTT as a strategic core subsidiary. KTT is tightly integrated within KTZ’s freight operations--one of the group’s main activities--and derives the bulk of its revenues from KTZ; and
-- As one of the main subsidiaries of the KTZ group, KTT is closely associated with KTZ and we think that its default would negatively affect KTZ’s access to the capital markets;
-- In addition, most of the KTZ group’s debt carries cross guarantees between KTZ and KTT, as well as cross-default provisions.
The stand-alone credit profile of KTT is constrained by what we see as the company’s obsolete rolling stock, which results in high investment needs; high debt leverage; high exposure to foreign currency risk; and exposure to rail traffic volatility under existing short-term lease contracts.