Kazakhstan’s largest bank, BTA, presented a restructuring proposal to investors last week that would allow it to cut its $10.3 billion debt by $8 billion to avoid bankruptcy.
The debt restructuring options include cash buyback with a 82.25 percent discount, BTA said in a presentation published on its website. Two other options are a 7-year rollover at a 60-percent discount with a 5-year grace period and reduced interest rates, and a 15-year subordinated rollover at par with a 10-year grace period and reduced interest rates. The fourth option is equity conversion at an 80-percent discount.
BTA expects a required participation of at least 55 percent for the cash buyback option, capped at $1 billion, and at least 20 percent for the equity conversion option.
By canceling some debt and converting some into equity, the bank plans to add at least $8 billion to its equity. In addition, Samruk-Kazyna will convert KZT683 billion ($4.53 billion) of deposits and subordinated debt into equity.
The proposed restructuring applies to debt principal and accrued interest and includes trade finance liabilities, a decision that is likely to draw ire from international investors.
BTA’s creditors have until September 18 to accept or reject the proposed restructuring, a deadline set by the Kazakh Financial Supervision Agency (FSA). A failure to agree on restructuring terms would likely lead to BTA’s bankruptcy, the bank warned earlier.
BTA defaulted on its obligations on April 20 after some creditors demanded accelerated repayments of the debt resulting from the state takeover of the bank. In July, the bank announced losses totaling at least $7.9 billion for 2008 which left the bank with negative equity of $4.9 billion. The government-appointed management blamed the bank’s huge losses on fraudulent operations of the BTA’s former managers led by former chairman Mukhtar Ablyazov. Kazakh prosecutors issued international arrest warrants for Ablyazov and former CEO Roman Solodchenko in March on suspicion that they embezzled money and laundered it through loans to fictitious companies. Ablyazov and Solodchenko have denied the charges.
BTA is one of three Kazakh banks which have defaulted on their debt this year. Alliance Bank presented a final restructuring proposal to its creditors in July and reportedly expects to finalize its $4-billion debt restructuring by September. Astana Finance meanwhile plans to to sign a debt restructuring agreement with its creditors by the end of October.
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