OREANDA-NEWS. November 16, 2009. Moody's Investors Service has downgraded the long-term issuer and debt ratings of Astana Finance to C from Ca. The issuer's Baseline Credit Assessment (BCA) has been lowered to 21 from 20 (on a scale of 1 to 21, where 1 represents the lowest credit risk). All long-term ratings carry stable outlook, reported the press-centre of KASE.

This rating action concludes Moody's review process which was initiated on 21 May and prompted by the issuer's default on its public debts. Following the default, Astana Finance considered the restructuring of its debts in the amount of around US1.8 billion and has recently signed a Memorandum of Understanding (MoU) with the Creditors' Committee, which contains indicative terms to be offered to creditors in connection with a proposed restructuring.

The MoU proposes that each type of creditor will be awarded a fixed basket of debt and equity instruments, with different terms for different types of creditors of the same subordination level. The domestic creditors have already announced their objection to the suggested restructuring plan and Moody's believes that this position may delay completion of the restructuring process.

Based on the financial information, published by Astana Finance as of end-August 2009, Moody's estimates that the potential losses for the issuer's creditors will exceed 50% in view of the substantial impairment of the issuer's assets (loan loss reserves accounted for about 33% of total loans), which has led to significant negative equity to date. Moody's also does not rule out the possibility of further deterioration of the issuer's asset quality because of the company's weak underwriting standards and still challenging economic environment in Kazakhstan. As a result, Moody's estimates the net present value of Recovery Loan Notes, proposed to the issuer's senior unsecured creditors (excluding holders of tenge-denominated bonds and trade finance creditors) as low.

"Moody's believes that the likelihood of cash contributions from existing shareholders, which would have increased the debt recovery for creditors, is low. The likelihood of systemic support provision from Sovereign Wealth Fund Samruk-Kazyna, which controls more than 25% of the company, is also low," says Maxim Bogdashkin, a Moody's Moscow-based analyst for Astana Finance.

Moody's previous rating action on Astana Finance was implemented on 21 May 2009 when its local and foreign currency debt ratings were downgraded to Ca from B3 (and the BCA was lowered to 20 from 17). Concurrently, the long-term ratings had been placed on review for further possible downgrade.

The principal methodology used in rating Astana Finance is "Revised Methodology for Government Related Non-Bank Financial Institutions", which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating the company can also be found in the Rating Methodologies sub-directory on Moody's website.

Headquartered in Astana, Astana Finance (Kazakhstan) reported total assets of US1.4 billion and total negative equity of US589 million, according to the company's preliminary unaudited consolidated IFRS statements as of end-September 2009.