S&P: KazMunaiGaz Finance Sub B.V. Proposed Senior Unsecured Notes Rated ‘BB+’

April 19. Standard & Poor’s. MOSCOW

S&P: KazMunaiGaz Finance Sub B.V. Proposed Senior Unsecured Notes Rated 'BB+'Standard & Poor’s Ratings Services said today that it assigned its ‘BB+’ debt rating to the proposed senior unsecured notes to be issued by KazMunaiGaz Finance Sub B.V. and guaranteed by Kazakhstan oil and gas holding company JSC NC KazMunayGas (KMG; BB+/Stable/-). At the same time, we assigned a recovery rating of ‘4’ to the proposed bond, indicating our expectation of average (30%-50%) recovery for creditors in the event of a payment default. Our recovery analysis assumes about $2 billion issuance under the notes. The ratings are subject to final documentation. The final amount, maturity, and coupon are to be determined at placement.

In a default scenario, we believe recovery prospects for the notes are likely to be heavily determined by the ability and willingness of the Kazakh government to negotiate with bondholders. The ‘4’ recovery rating reflects our expectation that senior unsecured bondholders would likely receive at least partial repayment, but reflects this key uncertainty. Actual recoveries could be higher or lower than the range indicated.

The rating on Kazakhstan oil and gas holding company KMG is one notch lower than the long-term foreign currency credit rating on KMG’s ultimate owner, the Republic of Kazakhstan (foreign currency BBB-/Stable/A-3, local currency BBB/Stable/A-3). The rating on KMG reflects Standard & Poor’s opinion that there is an “extremely high” likelihood of the government providing timely and sufficient extraordinary support to KMG in the event of financial distress. We assess the stand-alone credit profile of KMG at ‘B-‘.