S&P upgrades Azerbaijan Business Development Fund rating to BB

International ratings agency S&P Global Ratings has upgraded the long-term issuer credit rating of the Azerbaijan Business Development Fund (ABDF) to "BB" from "BB-", Report informs

According to S&P Global Ratings, the outlook on the rating is stable.

The agency affirmed the fund's short-term rating at "B".

S&P said the rating action was driven by the cleanup of the fund's loan portfolio and a significant improvement in its risk profile.

At the end of 2024, the Entrepreneurship Development Fund (EDF), which was incorporated into ABDF, wrote off 192 million manats ($112.9 million) in Stage 3 problem loans extended to credit financial institutions whose licenses were revoked between 2016 and 2020.

As a result, by mid-2025, the share of Stage 3 loans in the fund's portfolio had fallen to 1.4%, or 9.7 million manats ($5.7 million) from 24% at the end of 2023.

S&P noted that the Azerbaijan Business Development Fund was established on January 1, 2025, under the Ministry of Economy of Azerbaijan through the merger of the Entrepreneurship Development Fund and the Azerbaijan Investment Company (AIC).

The operational integration of the two entities is currently ongoing, along with the formation of the fund's board of directors.

The stable outlook reflects S&P analysts' expectations that the fund will successfully complete the integration process over the next 12 months, maintain strong capitalization and retain a moderate risk appetite.

S&P said a downgrade could occur if the integration process encounters difficulties or if the fund's debt burden and risk profile increase significantly.

The agency's analysts consider an upgrade unlikely in the near term.