Whether international lenders will agree to restructure the
debts of two of Kazakhstans largest banks is still
a big if, the central bank governor Grigori
Marchenko said yesterday.
And the success of the Kazakh banking sectors two-year
struggle to reduce its foreign debt burden hinges on the
outcome, Marchenko told Emerging Markets in an interview.
The talks on BTA and Alliance banks are threatened with
derailment, Marchenko said, because not all the parties
involved and particularly not investors who had bought
their credit default swaps (CDS) contracts wanted to
reach a successful outcome.
Its quite clear that more than 98% of people who
are buying CDS do not have underlying securities, because they
simply do not exist, he said. It has been a purely
speculative market. The problem with that is that the incentive
structure has changed.
Its quite sad, because actually two institutions
created this whole situation. One of these, Morgan
Stanley, was paid once because a payment was due,
and then accelerated another payment which was due in
2013, Marchenko said. He did not name the other.
Marchenko said the restructuring talks were not only putting
the banking sector at risk but also unfairly impacting
Kazakhstans sovereign rating. The rating agencies
are also looking at sovereign debt issues through the prism of
the resolution with BTA and Alliance. I think it is grossly
Moodys on Tuesday downgraded Kazakhstans local
currency government rating to Baa2 from Baa1 and changed the
outlook to negative.
Plans for restructuring BTAs $15 billion debt pile,
which was already underway, were tripped up in April by
accelerated payment requests from Morgan Stanley and the
unnamed international creditor. BTA then imposed a standstill
on principal payments, triggering cross-defaults on the
The variety of creditors and financial instruments
from syndicated loans to trade finance facilities
affected by BTAs restructuring plans is one of the main
stumbling blocks highlighted by lenders involved in the
discussions and by analysts.
Marchenko stressed that a successful resolution to Alliance
and BTAs debt restructurings could mean that
Kazakhstans banks would be over the worst by August this
If and its a big if this whole
issue with BTA and Alliance is resolved, after that
quarterly repayment and servicing is fairly low and
clearly manageable, Marchenko said. BTA has been courted
by what Marchenko described as strategic investors,
including Russias Sberbank.
Kazakhstans state-owned fund Samruk-Kazyna acquired
78% of the already troubled BTA in February. Sberbank was
involved in talks about BTA in February, broke them off, but
returned this month and is since reported to have carried out
Marchenko welcomed the prospect of Sberbank as an
acceptable suitor for BTA, particularly as it had
showed an interested in picking up the banks external
assets across Armenia, Georgia and Ukraine. But he warned that
any takeover proposal was again likely to hinge on BTAs
debt restructuring being resolved first. This whole issue
with BTA and Alliance is a balancing act, and its not