Alliance Merger After Overhaul Shows Smaller Rescue Cost

The Kazakh central bank chief said a merger of Alliance Bank with two lenders after its restructuring will produce a “serious player” with 120 billion tenge ($654 million) in capital, suggesting its rescue will cost less than originally estimated.

Billionaire Bulat Utemuratov and Alliance creditors “are coming to an agreement” as they near the completion of restructuring talks, central bank Chairman Kairat Kelimbetov told reporters in Astana today, without saying when the negotiations may end. After finishing the restructuring talks, Alliance is expected to be merged with Temirbank and ForteBank, he said. Any deal requires approval of the Kazakh regulator.

Alliance, which is seeking its second debt restructuring since 2010, resumed talks last month after breaking them off in May, when creditors rejected its proposal of a more than 40 percent recovery level. In January, creditors were asked to contribute 95.6 billion tenge of a total of 152.7 billion tenge.

Taking into account previous discussions, “we assume that haircuts to creditors were alleviated,” Nurlan Ashinov, an analyst at Almaty-based Visor Capital, said by e-mail. “We estimate the expected debt restructuring will bring an additional 134 billion tenge to the bank’s capital.”

A combined bank with 120 billion tenge implies Alliance will have about 61 billion tenge in capital, according to Ashinov. The bank had a shortfall of 72 billion tenge as of June 1, according to central bank website.

No one was immediately available to comment at Alliance Bank’s press service in Almaty.

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