Rating AMF at BBB- Level Tied to Rating of State

The long-term issuer default rating of the Azerbaijan Mortgage Fund (AMF) in foreign and local currency has been kept at the «BBB-» level with a "stable" outlook.

According to the report of Fitch Ratings, the rating of the structure is one to one with the sovereign rating of Azerbaijan, as the fund is tied to the public sector in the strict control of the government by the Central Bank of Azerbaijan and reflects government policy of funding the citizens' housing. CBA is the guarantor of the Fund upon redemption of bonds issued.

The country has a high demand for housing, fueled by a growing population and urban development in the context of high levels of old housing and low rate of living space per capita in the country.

Agency experts consider moderate AMF integration into the state budget system, because it has its own budget, and its debts are not consolidated with the debts of the state. This large proportion of the annual public funding received in the form of contributions. Thus, by 1 January 2015, the accumulated public contributions were at the level of 216 million manat (+ 40 million per year), this year is expected to receive an additional 50 million AZN. And in the medium term, the cash flow can further grow on the background of the government's decision to expand the program of social housing.

In addition, the CBA supports the liquidity of the Fund's bonds on the secondary market. So, to January 1, 2015 of the outstanding bonds the fund is 340 million manat (40 million manat per year). By May 1, the Central Bank has acquired approximately 60% of the AMF bonds from their holders because of the stress on the capital markets after the February devaluation of the manat, and this is a trend.

According to experts of Fitch Ratings, one should not expect rating changes at AMF until the sovereign rating of Azerbaijan changes. That will not happen for the simple reason that in the case of changing the legal status and the weakening of state control will reduce the likelihood of state support, which will lead to a break between ratings and fund rating. --17D-