Of Special Interest


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3rd January 2012

BTA close to failure - again

BTA is seeking to change the terms of its debt restructuring with its creditors warning that it may fail if the new terms are not agreed.

Chairman, Anvar Saidenov, chose to use an open letter to publicise this information, though the bank's problems were already apparent. He stated:

". . .The board is unanimously of the view that a further restructuring of the bank’s balance sheet is in the best interests of all the banks creditors, shareholders and GDR holders. If nothing is done to address this situation the bank is likely to be placed in conservation (administration) or commence bankruptcy proceedings under Kazakh law. . ."

There is no doubt that without aid from some source the bank will not be able to continue trading as 9 month figures clearly showed the severity of the problems and the bank has debts becoming due this quarter. Given the questionable progress since the first agreement it is possible the creditors will conclude that the bank cannot be saved and not agree to further writedowns. The first agreement took many months to agree and a similar wait would appear impractical. Most of the shares are already owned by the state wealth fund, Samruk-Kzyna and the ability of it or the central bank to find significant new funds would appear unlikely. It is understood the creditors include: Bank of America, Barclays, Commerzbank, Credit Suisse, Goldman Sachs, HSBC, Royal Bank of Scotland, Standard Chartered and Wells Fargo. In the first round creditors wrote down $7bn, around 60% of the debt.

Lazard Freres is advising BTA. A series of meetings with creditors is planned for later this month.

Kazakhstan's banks raised large amounts of money on the back of enthusiasm over oil and gas pipelines and related businesses. When this bubble burst many of the country's banks had financial problems. Adding to the external problems, BTA had internal problems with the claim that up to $12bn was embezzled by the former management. There is a trial currently occurring in London regarding embezzlement and fraud claims. Whilst the bank is seeking billions of dollars from the defendants it would appear unlikely that any significant sum be recovered in the event of them being found guilty. In a further problem the bank's accounting for arrears and bad debt has been questioned.