Kazakhstan’s financial regulator imposed a deadline on BTA Bank to complete its debt restructuring by September 18, notwithstanding a possibly negative impact on the country’s reputation with Western investors.
BTA repeatedly warned investors that a failure to restructure its $13-billion could lead to its bankruptcy. Last month it offered several restructuring options that would see creditors take up to 97-percent haircuts depending on the bank’s losses this year and whether trade finance was included in the scheme.
While expressing frustration with the lack of transparency and slowness of the process, Western creditors warned that forcing a deal at the expense of neglecting their demands could severely damage Kazakhstan’s investment image. Kazakh central banker Grigoriy Marchenko dismissed such concerns, however, echoing the sentiment of economists that dealing with the country’s debt problem will be key to restart growth in the economy.
“Image is nothing,” Reuters quoted Marchenko as saying. “I remember [the Russian debt crisis of] 1998 very well. Everyone has come back… and not even in 2-3 years but in 18 months.”
According to Yelena Bakhmutova, the chairwoman of the Financial Supervision Agency (FSA), BTA will likely include its trade finance liabilities in the overall restructuring, another thorny issue with Western creditors. Citing international precedents, two international banking associations urged Kazakh authorities to exclude trade finance debt in an open letter to Kazakh President Nursultan Nazarbayev.
Bakhmutova also said that Astana Finance, another Kazakh lender currently undergoing a debt restructuring, is expected to move out of the financial services business. The FSA had suspended its brokerage, asset management and lending licenses were suspended in June.