BTA Bank Debt Talks May Slow as Goldman Sachs Quits

July 1. Bloomberg

By Nariman Gizitdinov

BTA Bank Debt Talks May Slow as Goldman Sachs QuitsBTA Bank’s effort to restructure as much as $15 billion of debt may slow after Goldman Sachs Group Inc. resigned as an adviser to Kazakhstan’s largest lender.

BTA received a letter of resignation from New York-based Goldman Sachs, said BTA Chairman Arman Dunayev, who is also deputy head of the National Wellbeing Fund Samruk-Kazyna, which manages the state’s 75.1 percent stake in BTA.

“It was a discussion between BTA Bank and Goldman Sachs regarding amendment of the existing contract,” Dunayev said by telephone in Almaty, Kazakhstan’s financial capital. “BTA Bank declined.”

BTA hired Goldman Sachs and UBS AG as restructuring consultants after the government took control of the bank in February. Kazakhstan, which holds 3.2 percent of the world’s oil reserves according to BP Plc, has spent 770 billion tenge ($5.1 billion) of oil revenue to prop up the economy and banking system after the global credit crisis cut off funding and the nation’s economic boom fizzled.

“The change of adviser midway through the process would not be constructive,” said Milena Ivanova-Venturini, director of Equity Research Banking & Finance, a unit of Renaissance Capital in Almaty. “A further slowdown in a debt restructuring process that is already viewed by investors as extremely slow and not particularly transparent will add further negativism to the image of Kazakhstan as a reliable counterparty.”

BTA Default

A Goldman Sachs spokeswoman in London declined to comment.

BTA today denied local media reports that it had made principal payments to some creditors after April 20, when it announced a halt to such payments. The lender said it continues to make interest payments on debt.

BTA stopped making principal payments after some creditors demanded accelerated payment, triggering a default. The bank is in talks with creditors and will probably reach a debt restructuring agreement by August, Kairat Kelimbetov, the head of Samruk-Kazyna, said on June 5.

“This step will remain in effect until the bank reaches an agreement and implements a justified, transparent and effective program for managing existing debt with its creditors and investors,” BTA said in an e-mailed response to questions.

Bonds Fall

“The restructuring is being slowed down because of political motivations and it’s getting more and more complicated,” said Luis Costa, an emerging-market debt strategist at Commerzbank AG in London. “Basically half the board of BTA had to flee Kazakhstan. It’s not an easy restructuring process and it’s going to take a long time to sort out.”

BTA dollar bonds fell, with the yield on 8 percent notes maturing in 2014 jumping 4 percentage points to 60 percent today, a two-month high, according to prices on Bloomberg. Bond yields move inversely to their prices.

The Kazakh government took control of BTA after Roman Solodchenko, then chief executive officer, said on Feb. 2 that the bank was unable to increase its reserves by 400 billion tenge as ordered by the Agency for Financial Supervision.

Mukhtar Ablyazov was removed as BTA chairman the same day and left Kazakhstan before the government issued an arrest warrant, alleging he stole from the bank and laundered money through loans to offshore companies. Solodchenko was added to the wanted list in March for alleged embezzlement from BTA. Ablyazov said the charges against him were fabricated.

Goldman Replacement

BTA officials declined to say who would replace Goldman Sachs.

Marcia Favale-Tarter, an adviser to Samruk-Kazyna, said the government is “happy” with the way Lazard Ltd., the U.S. investment bank run by Bruce Wasserstein, is handling debt restructuring for Alliance Bank, Kazakhstan’s fourth-largest lender.

Almaty-based Alliance Bank, whose shares trade in London, stopped paying creditors in May after discovering $1.1 billion of liabilities that weren’t reflected on the lender’s balance sheet. Alliance has $3.6 billion of bonds and loans outstanding, according to data compiled by Bloomberg.

The government in February ousted Alliance’s management and installed the head of the country’s distressed assets fund as chief executive officer after the bank’s owner proposed to sell a 76 percent stake to the state for 100 tenge (66 U.S. cents).

Astana Finance, another Kazakh lender, defaulted in May. Astana has $2.2 billion of dollar, euro, yen and tenge debt, including $103 million due this year.

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Kazakhstan bank BTA hires UK law firm Lovells

July 2. Reuters. ALMATY

Kazakhstan’s largest bank BTA has hired British law firm Lovells LLP to advise it on debt recovery, the bank said on Thursday.

BTA, nationalised in February, is trying to restructure its $15 billion debt and plans to record a loss of about $8 billion in 2008 due to bad loan writedowns.

Earlier this week BTA said Goldman Sachs would no longer advise it on debt restructuring. UBS retains a similar mandate.