OREANDA-NEWS. On June 16, 2009 Standard & Poor's Ratings Services said that it had taken the following specific rating actions, reported the press-centre of KASE:

- The 'BB+' long-term corporate credit and 'kzAA-' Kazakhstan national scale ratings on Kazakhstan Temir Zholy (KTZ) were placed on CreditWatch with negative implications;

- The 'BB+' long-term corporate credit and 'kzAA-' Kazakhstan national scale ratings on JSC Kaztemirtrans (KTT) were placed on CreditWatch with negative implications;

- The 'BB+' long-term corporate credit rating on Kazakhstan Electricity Grid Operating Co. (JSC) (KEGOC) was placed on CreditWatch with negative implications.

Our placement of KTZ and its subsidiary KTT, the ratings on which are equalized with those on KTZ, on CreditWatch with negative implications reflects our concerns about the high concentration of their large cash reserves in several local banks, notably   (B+/Negative/B) and   (B/Negative/C). In our opinion, the liquidity and asset quality of these banks remain under pressure.

"We believe such concentration might result in restricted flexibility for KTZ and KTT in managing their cash assets," said Standard & Poor's credit analyst Sergei Gorin. Those assets comprised US413 million in cash and deposits as of March 31, 2009 (including US 45 million at the level of KTT). This causes us to believe that KTZ and KTT's liquidity is not as strong as we previously assumed. Meanwhile, assigning ratings to KTZ, we expected the group to have high liquidity, as it needs funds (USD450 m.) to repay Eurobonds in 2011.

KEGOC has a positive track record of receiving strong ongoing and extraordinary financial support from the state, including equity injections to cover liquidity shortfalls, which shows the government's willingness to provide support and justifies our top-down approach to determine the rating, which is two notches below the sovereign long-term local currency rating. However, KEGOC's stand- alone credit quality is rather weak because of its large investment program and high leverage.

The company's future credit quality therefore largely depends on the continuity of strong government support, while the government is facing the need to support a weakened banking system. If the government reconsiders its level of support to KEGOC, the ratings on KEGOC might be lowered due to its rather weak stand-alone creditworthiness (we assess KEGOC's stand-alone credit quality at 'B+').

Standard & Poor's plans to review the CreditWatch placement on KTZ, KTT, and KEGOC when we have a greater understanding of the level of financial support the government will provide to the companies and their flexibility in managing their liquidity. "If we believe their liquidity positions have deteriorated or if there are indications of lower state support, we could lower our estimation  of the companies' stand-alone credit profiles and/or lower the corporate credit ratings on the companies," said Mr. Gorin.