BTA Shareholders Seek $3 Billion From Kazakhstan

BTA Bank’s shareholders are seeking as much as $3 billion from Kazakhstan’s government for damages they say their clients incurred in the state takeover of the country’s biggest lender.

By Emma O’Brien and Nariman Gizitdinov

May 6 (Bloomberg) — BTA Bank’s shareholders are seeking as much as $3 billion from Kazakhstan’s government for damages they say their clients incurred in the state takeover of the country’s biggest lender.

KT Asia Investment Group BV, based in Amsterdam, and Vienna-based GEM Equity Management AG allege the acquisition of 75 percent of BTA by the government’s sovereign wealth fund constituted nationalization, violating investment treaties that Kazakhstan has with the Netherlands and Austria, the Kazakh Agency for Financial Supervision said today.

“The government bought authorized shares of the bank in accordance with Kazakh laws,” Yelena Bakhmutova, chairman of the agency, said in faxed responses to questions from Bloomberg News. “This isn’t nationalization because the government will sell its stake in the future.”

Kazakhstan’s sovereign wealth fund Samruk-Kazyna paid 212 billion tenge ($1.67 billion) for 75.1 percent of BTA in February through a sale of new shares after the bank failed to raise enough money to bolster its reserves to the level demanded by the government, diluting the stakes of other investors.

The Dutch and Austrian companies filed complaints with arbitration bodies of the United Nations and World Bank against Prime Minister Karim Masimov, the central bank and the Finance Ministry, according to Clyde & Co. LLP, the London-based law firm handling the cases. Arbitration rules prohibit disclosing details of the proceedings, a Clyde lawyer said by phone from London.

$3 Billion

Kazakhstan “acted through” Prime Minister Karim Masimov, the National Bank of Kazakhstan, the Finance Ministry, the state financial regulator and Samruk-Kazyna, the lawyer said. KT Asia Investment owned 9.7 percent of BTA last June, according to bank data released that month of shareholders with stakes of more than 5 percent. GEM Equity Management wasn’t listed at the time. In all of 2007, existing shareholders bought $1.5 billion of new shares, according to BTA data.

Anvar Saidenov, the former central banker who was put in charge of BTA in February, told reporters in Almaty last week that two shareholders had filed “lawsuits” seeking $1.5 billion each, without elaborating. Clyde & Co. confirmed the $3 billion total.

Debt, Default

BTA halted principal payments on its debt April 23, blaming creditors for demanding immediate repayment of debt. Standard & Poor’s downgraded BTA to “default” and Fitch Ratings cut it to “restricted default” as the bank’s credit-default swaps, or debt insurance, were called in. BTA has $1.03 billion in bonds and loans due this year, according to Bloomberg data.

Arbitration allows parties to privately resolve disputes outside of the reach of local courts. The Dutch case will be moderated by the World’s Bank’s International Centre for Settlement of Investment Disputes, or ICSID, in Washington, while the Austrian one will be conducted under the United Nations Commission on International Trade Law, or UNCITRAL, in Vienna.

Kazakhstan, the Dutch shareholder and ICSID will each appoint an arbitrator to rule on the case as a “triumvirate,” the Clyde lawyer said. Under UNCITRAL rules, a tribunal is set up by the parties involved, said Corinne Montineri, legal officer at the Vienna-based body.

AIG Case

“The Kazakh Government is in the process of selecting a representative” for the proceedings, said Bakhmutova, the financial regulator.

BTA shares jumped 8.7 percent to 2,827 tenge at 5 p.m. in Almaty. Its 7.875 percent dollar-bonds due next year rose 1.1 percent to 21.183 cents, according to ING Groep NV prices compiled by Bloomberg. The price on BTA’s 8 percent bonds due 2014 added 0.2 percent to 17.545 cents.

Five cases have been brought against Kazakhstan in the past eight years, three of which are still pending, according to ICSID’s Web site. AIG Capital Partners Inc., a unit of U.S. insurer American International Group Inc., brought an arbitration case against Kazakhstan in 2001 over the construction of a residential housing complex. The case was settled for an undisclosed sum in 2003, according to the ICSID Web site.

Martijn Odens, an adviser to KT Asia, declined to comment today when reached by phone in Amsterdam. Nobody answered the door when a Bloomberg reporter rang the bell at GEM Equity Management’s registered address in Vienna. Austrian company records show Anuar Aizhulov has been CEO of GEM since 2006. Aizhulov was appointed chairman of BTA insurance units BTA Life and BTA Zabota last July, after heading the bank’s Ukrainian unit, BTA’s Web site shows.

Sholpan Mukasheva, a spokeswoman for Samruk-Kazyna, and Ainagul Shakirova, spokeswoman for the prime minister, declined to comment about the cases immediately, as did Gulnar Yertlesova of the central bank and the Finance Ministry’s Anna Zhekenova.