Kazakhs to Protect BTA Bank From Default, Wealth Fund Says

Kazakhstan’s sovereign wealth fund Samruk-Kazyna will inject cash into BTA Bank if the lender requires financing to avoid a second default, an official said.

“I don’t think BTA Bank will have to restructure debt or face bankruptcy, but we will provide financing to BTA if needed,” Aidan Karibzhanov, a deputy chief executive officer at Samruk-Kazyna, said in an interview in Astana. The fund hasn’t considered how it would inject money into the lender, he said.

BTA was the nation’s biggest lender before it defaulted and was taken over by the state in 2009 when credit markets froze and Kazakhstan’s property bubble burst. Last year, the bank restructured $16.7 billion of debt. BTA’s dollar-denominated notes due in 2018 surged, pushing the yield 197 basis points lower to 14.82 percent as of 6:10 p.m. in Almaty, the lowest level in more than a month.

BTA creditors, including Goldman Sachs Group Inc. (GS), HSBC Holdings Plc (HSBA) and Barclays Plc (BARC), last year agreed to reduce the bank’s debt to $4.2 billion in exchange for cash and a stake in the company. Bondholders also received 10-year “recovery notes” under which they will receive 50 percent of anything BTA recovers from impaired assets, including any award in a lawsuit against the bank’s previous management.

Loan Provisions

The lender sued ex-Chairman Mukhtar Ablyazov and former Chief Executive Officer Roman Solodchenko in a U.K. court, seeking the return of $4 billion it claims the men siphoned off through fake loans. Ablyazov and Solodchenko, who now live outside Kazakhstan, have denied the charges.

BTA Bank’s payments on liabilities exceeded income by 3 billion tenge ($21 million) a month this year and operating expenses averaged 2 billion tenge a month, CEO Anvar Saidenov said in a June 3 interview. The bank plans to offer its borrowers new terms in an effort to increase repayments on 1 trillion tenge of loans, he said.

BTA provisions for bad loans totaled 911 billion tenge as of June 1, according to Kazakhstan’s financial regulator.

“We expect a more effective business model from BTA Bank and remain unhappy with the lack of profit at the lender,” Karibzhanov said.

BTA is asking Samruk-Kazyna to accept a lower rate of interest on money the fund has on deposit and on guarantees for central bank repurchase operations, Saidenov said last month. BTA also wants the fund to pay higher interest on bonds held by the lender. While Samruk-Kazyna pays 4 percent, BTA’s auditor believes the rate should be 6 percent, he said.

Samruk-Kazyna plans to “sort out the situation with the bonds,” Karibzhanov said in the July 5 interview. “We will not let the bank get into trouble.”

To contact the reporter on this story: Nariman Gizitdinov in Almaty at ngizitdinov@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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