OREANDA-NEWS. March 25, 2009. Standard & Poor's Ratings Services said that it placed its 'B/B' counterparty credit rating on Kazakhstan-based Alliance Bank JSC (Alliance) on CreditWatch with negative implications. The rating had been on CreditWatch with developing implications since Feb. 3, 2009, after Samruk Kazyna announced its proposed acquisition of majority stakes in the bank, reported the press-centre of KASE.

"The rating action reflects our view of the reduced likelihood of government support and the increasing possibility of a restructuring of the bank's debt obligations. We understand that the government is not willing to guarantee Alliance's foreign debt," said Standard & Poor's credit analyst Annette Ess, CFA.

We classify Kazakhstan as an "interventionist" country regarding its support of systemically important banks such as Alliance. Although Samruk Kazyna's majority takeover of Alliance has still not been completed and is likely to take some time, we currently factor in one notch of government support for Alliance's systemic importance.

The rating action also reflects our view of the continuing downward pressure on the bank's stand-alone credit profile due, among other things, to significant asset- quality deterioration, which is depleting its capitalization. Also contributing to the rating action are what we see as continuing funding and liquidity challenges and the instability of deposits. We believe that Alliance is also affected by the current global liquidity crisis and a severe domestic economic slowdown, both of which continue to erode liquidity levels and asset quality.

We expect to resolve the CreditWatch after obtaining information on the probability of Alliance's debt restructuring, finalization of the acquisition by Samruk Kazyna or Samruk Kazyna's decision not to acquire the bank, and further clarification of the implications of government ownership for Alliance's creditworthiness, strategy, and financial flexibility. If debt restructuring is imminent we would change the ratings to 'D'. Barring any further deterioration in its operating environment, we may affirm the current ratings if Alliance decides not to restructure its debt and to meet all its obligations in a timely manner; if we consider that extraordinary state support is more likely; or if the government's enhancement measures sustainably strengthen Alliance's  stand-alone credit profile.