BTA strikes restructuring deal with creditors

BTA Bank, Kazakhstan's embattled lender, has reached a deal to restructure its $11.6-billion debt on December 7, the bank said in a statement.

The package is reportedly worth $5.57 billion, or 48 percent of outstanding principal and interest. BTA plans to pay about $1 billion in cash to the creditors and issue $2.3 billion of new senior debt and about $797 million of subordinated debt, according to the agreement.

The lender will also provide so-called original issue discount debt instruments with an initial value of $763 million and final value of $1.636 billion, to export credit agencies and some eligible trade finance creditors, BTA said.

A group of senior creditors will receive 10.5 percent of BTA's equity and subordinated financial creditors will receive 4.5 percent under a so-called junior package, according to the agreement. Kazakhstan's National Wellbeing Fund Samruk-Kazyna will own 85 percent of BTA after the restructuring.

BTA said the document was not final and would be "supplemented by more detailed terms in due course." The restructuring is yet to be approved by all creditors. The Creditors' Steering Committee, which had signed off on the deal, consists of ABN AMRO, Commerzbank, the D. E. Shaw Group, Euler Hermes Kreditversicherungs AG, Fortis, Gramercy Advisors, ING Asia, Standard Chartered, U.S. Export-Import Bank and Wachovia.

The agreement opens the door for BTA and the Kazakh government to resume talks with Russia's largest bank, Sberbank, to sell the stake currently owned by Samruk-Kazyna. According to BTA, the negotiations could begin in February.

"Sberbank may purchase the whole stake," Reuters quoted the head of Samruk-Kazyna Kairat Kelimbetov as telling reporters in Moscow.

Tough negotiations

The agreement follows months of negotiations. Creditors opposed an earlier proposal under which some bondholders would have received a cash payment equal to 17.75 percent of face value, with none of the remainder rescheduled.

Analysts have generally assessed the deal as reasonable.

"I believe creditors are coming to the conclusion that there is not much more to squeeze in terms of better conditions," Luis Costa, an analyst at Commerzbank, told Bloomberg.

Both sides sought to find an agreement. A failure to restructure BTA's debt - and the bank's subsequent bankruptcy - would likely have left creditors empty-handed while Kazakhstan's image as a safe investment destination would take another hit.

Economists, including the International Monetary Fund and the European Bank for Reconstruction and Development, say sorting out problems at BTA and other banks is key to securing the recovery of Kazakhstan's economy, which has already shown positive signs on the back of rising oil prices.

BTA is one of four Kazakh banks which had defaulted in 2009. [1] Alliance Bank, formerly the fourth largest bank, already reached an agreement to restructure its $4-billion debt, while [2] Astana Finance and [3] Temirbank are still in talks with creditors.

SRI