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S&P affirms Kazakhstan-based ENRC 'BB' ratings, outlook negative

Bishkek (AKIpress) - 53495709a06ea8310ce719826d7bbdd9 Standard & Poor's Ratings Services affirmed its 'B' long-term and 'B' short-term corporate credit ratings of Eurasian Natural Resources Corporation Ltd (ENRC), a Kazakhstan-based mining group, outlook is negative, S&P reported on May 14.

ENRC completed its leveraged buyout and delisted from the London Stock Exchange and Kazakh Stock Exchange in the fourth quarter of 2013. As a result of this buyout, ENRC's adjusted total debt has increased substantially to about $8 billion as of December 31, 2013.

The debt increase is largely related to a $1.7 billion acquisition financing that the company received from Russian state-owned VTB bank. VTB and Sberbank are the lenders of the bulk of ENRC's debt.

"We continue to view ENRC's liquidity as "less than adequate," given the high debt maturities from the fourth quarter of 2015. We also view ENRC's access to funding as constrained by risks related to an ongoing Serious Fraud Office investigation," the agency said.

The negative outlook reflects the probability of a downgrade over the next six months if management is not able to address ENRC's currently high leverage. This will depend on new information the agency expects to receive from management over the next three to six months regarding ENRC's debt-reduction strategy.

Any perceived weakening of bank support from Sberbank or VTB would also result in rating downside.

S&P might also lower the rating if the final audited IFRS-based report for fiscal-year 2013 includes material credit-negative factors that are as yet undisclosed.

In December 2013, S&P affirmed its 'BBB+/A-2' long- and short-term foreign and local currency sovereign credit ratings on Kazakhstan. The outlook is stable.

Also, the agency has affirmed its 'BBB-' long-term corporate credit rating on Kazakhstan's National Oil and Gas Company KazMunaiGas (KMG), and the outlook is stable.

S&P has affirmed its 'BB+' long-term corporate credit ratings on Kazakh gas utility company KazTransGas (KTG) and its 100-percent owned gas pipeline operator Intergas Central Asia JSC (ICA), and the outlook on both companies is stable.

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