Fitch Ratings has reaffirmed Kazakhstan's Sovereign Wealth Fund Samruk-Kazyna (SK) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) at 'BBB' with a Stable Outlook.
This affirmation is grounded in Fitch's continued belief in the high probability of state support for SK, considering its status as a government-related entity (GRE) and its vital role as Kazakhstan's strategic policy arm.
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Key Rating Drivers:
Status, Ownership, and Control: 'Very Strong' SK, managing a portfolio of strategically important national companies, is underpinned by national legislation. As the sole shareholder, the state controls SK's strategic decisions, formulates key policies on debt, dividends, and investments, and appoints its board and CEO. SK shares cannot be sold, pledged, or seized without government approval. Fitch asserts that an SK default would lead to the unconditional transfer of its assets and liabilities to the state.
Support Track Record: 'Strong' SK benefits from supportive national regulation, receiving dividends from state-owned companies and cheap funding support. At the end of 2022, state-originated debt constituted 76% of total debt at the parent level, mostly represented by domestically held bonds purchased by the National Fund of the Republic of Kazakhstan (NFRK). Fitch sees the recent KZT 500bn (around $1.1bn) purchase of SK's shares of National Company KazMunayGas (KMG) by NFRK as credit-neutral for SK, reinforcing the close ties between SK and the state.
Socio-Political Implications of Default: 'Strong' Given that companies under SK's management form the core of Kazakhstan's economic wealth, with assets averaging 38% of national GDP from 2018-2022 and employing 259,000 individuals (3% of the national workforce), an SK default could lead to significant socio-political implications. Disruptions to SK's operations could have long-term economic consequences and impede economic development.
Financial Implications of Default: 'Very Strong' While the government does not provide an explicit guarantee on SK's debt, Fitch considers such debt a moral obligation of the state, viewing it as quasi-sovereign liabilities. SK plays a significant role in debt markets, with leading portfolio companies seen as quasi-sovereign borrowers. As of end-2022, SK's total debt at the group level amounted to KZT 10.7 trillion (over $23bn), approximately 10% of GDP.
Operating Performance: In 2022, SK's net income rose to KZT 951bn (around $2.1bn), mainly sourced from dividends of major subsidiaries. Operating revenue at the group level increased to KZT 14.8 trillion (over $32bn), with reported net income of KZT 2.4 trillion (over $5.2bn).
Derivation Summary
Fitch's assessment of key rating drivers under GRE Criteria results in a support score of 45 out of a maximum of 60, leading to SK's ratings being equalized with the sovereign's IDRs.
Liquidity and Debt Structure
SK's 2022 debt of KZT 2.7 trillion (around $5.9bn) includes government-related debt (76%), primarily domestic bonds held by NFRK, Eurobonds (8%), local market bonds (8%), and various loans. Exposure to floating interest rates and foreign-currency debt is moderate (2.4% and 10.8%, respectively).
SK, a national strategic holding company, holds stakes in over 60 companies across various sectors, contributing to Kazakhstan's economic development.
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