No bail-out for BTA, Kazakhs warn

15/05/2009 | Sarah White

Samruk-Kazyna, the Kazakh sovereign wealth fund, confirmed yesterday that it will not bail out beleaguered BTA bank, which it controls, if it fails to reach agreement with creditors.

Samruk’s hardball stance piles the pressure on BTA’s lenders to come to an amenable conclusion to talks on restructuring $15 billion worth of debt.

“Samruk is willing to support BTA up to a point,” said Marcia Favale-Tarter, an independent advisor to the chairman of Samruk and the government on their financial restructuring strategy. But “there is no magic purse of money”.

Favele-Tarter told Emerging Markets that Samruk, which owns 75% of BTA, was supportive of the debt restructuring, but that they would not help the bank beyond that.

Samruk’s stance, which puts the onus on the bank’s 142 lenders to keep it afloat, was supported by BTA chairman Anvar Saidenov, who acknowledged that a full debt guarantee from the Kazakh government or Samruk “would have been very attractive outcome” for creditors.

But Saidenov argued that it was not the government’s responsibility to account for all of BTA’s debt, adding that “the bank was private when it took on its debt and borrowed so much.”

Samruk’s position could spell the liquidation of BTA if lenders are unwilling to play ball – a risk compounded by the complexity of negotiations.

The number of creditors and financial instruments involved is one of the main concerns for lenders involved in the debt talks, and their unwillingness to accept steep haircuts may also be a stumbling block. Grigori Marchenko, Governor of the National Bank of Kazakhstan, yesterday described the success of the restructuring plan as a “big if”.

But some analysts have been supportive of Samruk’s stance, as it could swing the outcome in BTA’s favour. “You cannot just expect Samruk to pour $12 billion of the country’s reserves into BTA,” said Luis Costa, emerging markets analyst at Commerzbank in London. “That would just be too good to be true for bondholders and lenders.”

However, Costa urged BTA’s management to present a restructuring plan quickly, saying that lenders were “hungry for information and it’s just taking far too long.”

A London based capital markets banker involved in the talks told Emerging Markets that Samruk’s position was a “threat from BTA to the creditors to act in BTA’s interest,” which could see it eventually reach a solution.

Saidenov acknowledged that the vast number of creditors involved in discussions would complicate talks, but said that a solution could be reached without the consent of the whole creditor group.

“There are many different instruments and a great number of creditors, but there is no need for the consent of 100% in restructurings, it can be 50% or 75% in certain cases,” he said.

Related stories

  • Crisis ahead for Croatia without dramatic changes, warn ...

    A terrible cocktail of a vast debt pile, large fiscal deficit and lack of growth has pushed Croatia’s debt profile precariously close to unsustainable levels. Without comprehensive structural reforms, many believe the country’s economy will be in crisis by the end of the decade.

  • Making the bond markets work for CEE infrastructure

    If the central and eastern European countries’ vast infrastructure investment gap is ever to be bridged, then private capital via the bond markets will have to be harnessed

  • CEE urged to tap Asia for DCM lessons

    The gap between infrastructure needs and investment in Central and Eastern Europe shows why the region needs to learn lessons from Asia on how to build deep debt capital markets, according to leading bankers

  • Exports, not invasion, biggest Russian risk for Lithuania

    Rimantas Šadžius, Lithuania’s finance minister, tells Emerging Markets how Russia’s weak economy and currency are making conditions tough for the Baltic country, but that reliance on Russian energy is falling.

  • Ukraine taps private sector and Georgia to reform conflict ...

    President Petro Poroshenko and premier Arseniy Yatsenyuk have dipped into Georgia’s deep pool of reformist talent in an effort to rebuild Ukraine’s war-ravaged economy. However, even with a vast IMF package and other financial assistance, many have trouble seeing how Ukraine is ever going to return to growth while it is in conflict with the Russia-backed rebels in the east

Editor's Picks

In Focus

  1. Georgian jewel shines bright against Russian darkness

  2. Ukraine taps private sector and Georgia to reform conflict-ravaged economy