Temir bank defaults on debt; seeks restructuring

Temirbank, Kazakhstan's tenth largest bank, has defaulted on its debt and became the fourth Kazakh lender to seek restructuring this year, the bank said in a statement on Monday.

Temirbank, majority-owned by BTA Bank, which is also undergoing a restructuring process, missed debt payments on November 6 and November 9 and said it would stop repaying principle and interest of all its debt. The default followed a "substantial deterioration" of Temirbank's loan holdings, which pushed regulatory capital below the required minimum and could have cost the bank its license, the bank said.

"[The Financial Supervision Agency (FSA), Kazakhstan's financial regulator,] has agreed not to [withdraw the banking license] on condition that Temirbank takes urgent steps to secure its satisfactory recapitalization and other steps to remediate the position of Temirbank by the end of December 2009," the bank said in a statement.

The FSA and the Specialized Financial Court of Almaty have already approved plans to restructure Temirbank's debt. According to the bank's statement, the restructuring will involve international bond guarantees and domestic bonds, some trade finance transactions and certain related-party obligations. The national holding and investment fund Samruk-Kazyna plans to provide equity funding to Temirbank once the restructuring is concuded.

Temirbank, with debt of $1.42 billion, has joined BTA Bank, Alliance Bank and Astana Finance, which defaulted in April and May. In total, the four Kazakh lenders seek to restructure more than $20 billion in debt. Samruk-Kazyna acquired a 75.1-percent stake in BTA in February and will gain control of Alliance after its debt restructuring is complete. It also owns 26.5 percent of Astana Finance.

BTA Bank, which owns a 55.6-percent stake in Temirbank, was earlier considering selling the subsidiary, as part of its own debt restructuring.

Temirbank recorded a 10-month net loss of KZT110.8 billion ($745 million), compared with a loss of KZT389 million ($2.59 billion) in the same period last year, according to data posted on the FSA's web site. Its liabilities exceeded its assets by KZT61.2 billion ($408 million) as of November 1.

By SRI