Alliance Creditors Back $4.5 Billion Restructuring

Dec. 15. Bloomberg

By Nariman Gizitdinov

Alliance Creditors Back $4.5 Billion RestructuringAlliance Bank, Kazakhstan’s second- biggest lender to default this year, said creditors approved a plan to restructure 677 billion tenge ($4.5 billion) of debt.

The restructuring plan was backed by 95.1 percent of the bank’s creditors and will reduce Alliance’s debt to about 150 billion tenge, the London-traded lender said today in an e- mailed statement. Under Kazakh law, a restructuring plan is approved when it’s supported by creditors who hold two-thirds of the debt a bank seeks to restructure, Alliance said.

Alliance, then Kazakhstan’s fourth-biggest lender, defaulted in April after it found $1.1 billion of liabilities that weren’t reflected on its balance sheet. Kazakh authorities in October issued international arrest warrants for two former chief executive officers of Alliance, Dauren Kereibayev and Erik Sultankulov. They could not be reached for comment today.

Kazakh police previously arrested or issued arrest warrants for five others linked to Alliance Bank, including Chairman Margulan Seisembayev and former CEO Zhomart Yertayev.

Seisembayev defended former managers in an open letter published on Aug. 30 by the Interfax news service. The funding came from Russian banks, with $636 million used to bolster charter capital, $60 million for interest on the loans, $50 million to cover losses and the rest to buy the bank’s own securities, according to the letter.

Deteriorating Loan Quality

“It would be easier for creditors to deal with the problem of a $1.1. billion loss than with quality deterioration of Alliance’s bank loan portfolio,” Eric Lalo, a representative of Lazard Freres & Co., which advised Alliance on its debt restructuring, told reporters today.

Alliance plans to complete restructuring by March 1, said Maksat Kabashev, the head of Kazakhstan’s distressed-assets fund, who became CEO of Alliance in February after the government made an emergency deposit of 24 billion tenge as the financial crisis weakened the nation’s banks.

Kazakhstan will get a 67 percent stake in the bank under the restructuring plan, while creditors will get 33 percent, Kabashev said.

Seimar Alliance Financial Corp., Alliance’s parent company, currently owns all but 16 percent of the bank that is held by other shareholders. This 16 percent stake may be diluted, though not canceled, Kabashev said without elaborating.

“The creditors’ approval was not only a vote of confidence in Alliance Bank management, but also a vote of confidence in the future economic development of Kazakhstan,” Lalo said.