Kazakh Fund to Boost Alliance Bank Capital by $857 Million

July 13. Bloomberg

By Nariman Gizitdinov

Kazakh Fund to Boost Alliance Bank Capital by $857 MillionAlliance Bank, the London-listed Kazakh lender that defaulted in April, will get a 129 billion- tenge ($857.3 million) capital injection from a state-owned fund, which will take control of the lender.

The National Wellbeing Fund Samruk-Kazyna will sign an agreement today or tomorrow to inject the capital once Alliance completes a debt restructuring, Gaziz Shakhanov, head of international relations for the Almaty-based bank, said by phone. The additional capital will help the lender meet regulatory requirements, he added.

The fund will inject 24 billion tenge in cash while 105 billion will come as Samruk-Kazyna converts Alliance Bank bonds into preference shares. The fund aims to take control of the bank with a stake of at least 51 percent, Shakhanov said.

Kazakhstan’s sixth-biggest lender said last week it will complete debt restructuring by Nov. 1 after reaching agreement with a creditor committee. Under the agreement, creditors will choose from several options, including a cash payout of as much as $500 million, a 77.5 percent loss on what they are owed.

Alliance Bank’s liabilities exceed capital by 438 billion tenge after it had a loss of 595 billion tenge in the five months through May, the Agency for Financial Supervision said on its Web site.

Alliance Bank said in May that it had given $561 million of U.S. Treasuries to Metropol (Cyprus) Ltd., a member of the Metropol Group, and $542 million to another unidentified Russian lender to repay funds borrowed by offshore companies from 2005 to 2008. On April 13, the bank said it had stopped paying creditors after discovering liabilities that weren’t reflected on its balance sheet.

Seimar Alliance Financial Corp., which owns 81.7 percent of Alliance Bank, offered in February to sell a 76 percent stake to Samruk-Kazyna for 100 tenge ($0.66).