S&P: Ratings On Kazakhstan-Based Delta Bank Downgraded To ‘CC’

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Kazakhstan-Based Delta Bank Downgraded To ‘CC’ On Increased Probability Of Bond Nonpayment; Remains On Watch Negative, reports KazWorld.info with reference to the official website of S&P Global Ratings.

  • On Jan. 31, 2017, Delta Bank JSC paid in full the Kazakhstani tenge (KZT) 469 million coupon on its senior unsecured bond due Jan. 18, 2017, issued under its first bond program, but did not repay the principal of KZT9.8 billion (about $30 million).
  • The bank has a grace period of 10 business days, starting Feb. 1, 2017, to repay the principal on the bond.
  • We are lowering our long-term ratings on Delta Bank and its senior unsecured debt issues to ‘CC’ from ‘CCC-‘ and keeping them on CreditWatch negative.
  • The CreditWatch reflects that we would likely lower the ratings to ‘SD’ (selective default) or ‘D’ (default) if Delta Bank does not repay the principal on the bond in full within the grace period, or stops servicing some or all of its other obligations.

FRANKFURT (S&P Global Ratings) Feb. 2, 2017–S&P Global Ratings said today that it has lowered its long-term counterparty credit rating on Kazakhstan-based Delta Bank JSC and its ratings on the bank’s senior unsecured debt issues to ‘CC’ from ‘CCC-‘. We reinstated our ‘CCC-‘ rating on the KZT10 billion 9.5% bond due Jan. 18, 2017, which was inadvertently withdrawn on the maturity date, before lowering it to ‘CC’.

The ‘C’ short-term counterparty credit rating on Delta Bank was affirmed.

At the same time, we lowered our Kazakhstan national scale ratings on Delta Bank to ‘kzCC’ from ‘kzCCC-‘.

All the ratings remain on CreditWatch with negative implications, where we placed them on Jan. 23, 2017.

The rating actions follow Delta Bank’s nonpayment of the KZT9.8 billion principal on its senior unsecured bond due on Jan. 18, 2017, issued under its first bond program. The bank repaid the coupon of KZT469 million on Jan. 31, 2017. On Feb. 1, 2017, a grace period of 10 business days started for the repayment of the principal on the bond.

In our view, the bank’s current liquid assets are not sufficient to repay the bond in full.

Delta Bank is still awaiting support from the National Bank of Kazakhstan (NBK), which Delta Bank requested in late December 2016. We understand that the NBK’s support is contingent on a liquidity injection from the bank’s owner, which has not yet materialized. We consider it unlikely that the anticipated support from the owner and the NBK will come within the bond’s grace period. Therefore, we see an increased probability of Delta Bank defaulting on its bond.

We expect to resolve the CreditWatch by mid-February 2017, when the current grace period expires.

We will lower the ratings to ‘SD’ or ‘D’ if the bank has not repaid the bond in full or has stopped servicing some or all of its other obligations.

We could affirm the ratings or even raise them if the bank’s liquidity position were to stabilize, enabling it to service its debt obligations in full and on time.

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