Fitch updates Azerbaijan’s MCGF outlook to Positive


The Outlook on the Mortgage and Credit Guarantee Fund of the Republic of Azerbaijan’s (MCGF) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) has been changed from Stable to Positive by Fitch Rating, and the IDRs have been confirmed at “BB+”.

The Outlook was updated after Azerbaijan’s (BB+/Positive) Outlook was changed from Stable to Positive. The confirmation reflects Fitch’s unchanged perspective on the fund’s close ties to Azerbaijan, as well as its strategic significance in providing accessible housing and improving the business climate through facilitating financing for small and medium-sized businesses (SMEs).

Regardless of the company’s Standalone Credit Profile, the evaluation of support rating criteria under Fitch’s Government-Related Entities (GRE) Criteria produced a score of 50, bringing the ratings into parity with the sovereign (SCP).

The fund is a nonprofit organization with special status that the state owns entirely. Only the President of Azerbaijan may decide to liquidate or reorganize the fund. In the event of insolvency, the state is not required by law to cover the fund’s liabilities. Fitch believes that if necessary, liability transfer to the state or a state-designated body might be one of the supportive actions used.

Through a trustee board, whose members are chosen by the President, the central government maintains strict control over the fund’s operations. Currently, the board is made up of officials from the Central Bank, multiple ministries, and the presidential administration. The fund’s annual borrowings are approved by the trustee board.

The state continues to provide MCGF with strong assistance. It receives annual capital infusions from the state for social mortgage funding, which in 2021–2022 amounted AZN166 million. Another form of assistance is the Central Bank’s buy-back guarantee on the bonds issued by the fund. It means that the Central Bank must agree to requests from bondholders to repurchase the fund’s bonds.

Read the whole Fitch Ratings analysis here.

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