EBRD to launch $150m Kazakh corporate rescue fund

14/05/2010 | Simon Pirani

The EBRD and Samruk-Kazyna, Kazakhstan’s state holding company, plan to launch a joint $150 million fund next month to restructure stricken companies

The EBRD and Samruk-Kazyna, Kazakhstan’s state holding company, plan to launch a joint $150 million fund next month to restructure stricken corporates.

Olivier Descamps, the EBRD’s managing director (Turkey, eastern Europe, Caucasus and Central Asia), said that an international fund management firm with restructuring experience would manage the project.

“Corporates are stuck in ‘hangover mode’ post-crisis. Banks will only lend to the best clients, and some corporates are falling through the cracks. We intend to address this problem”, Descamps told Emerging Markets.

The plan is part of a joint approach – under which the EBRD intends to invest up to $1 billion – agreed in February with the Kazakh industry ministry and Samruk-Kazyna, which uses the proceeds of Kazakhstan’s sovereign wealth fund to invest in the local economy.

Descamps said that corporate restructuring was one of four things that could help to pump-prime Kazakhstan’s economic progress.

A second factor was the “general upward trend” this year, on the back of strong hydrocarbons prices. The country was “not out of the woods, but is going forward”, Descamps argued.

A third element was credit to small and medium-sized businesses, which the EBRD’s work on local currency markets could influence. “Some banks will need long-term credit lines so that they can take long-term assets.” It would take time after Kazakhstan’s two largest banks had been hit by “an asset-liability bazooka”, but had to be done.

Finally, Descamps argued, was the banking sector restructuring. Its failure had “a great impact”, he said, “but we must also recognise that the authorities did a good job in dealing with the crisis”. The question now is, “will the banking sector resume its core activity? Don’t just look at [restructured BTA and Alliance], look at the others and what will be needed to get a resumption.”

Alain Pilloux, the EBRD’s managing director (industry, commerce and agribusiness), said that the EBRD’s investments in Kazakhstan would focus on diversification, a vital issue across the region.

Encouraging foreign direct investment is a key part of the bank’s strategy, Pilloux said, pointing to the Russian automotive sector – in which Toyota, Volkswagen, Ford, Peugeot, Mitsubishi and others have invested billions of dollars – as an “example of success”.

In Russia and other former Soviet countries, the EBRD “needs to encourage the growth of a mittelstand”.

Asked if the bank’s strategy cuts across that of the big Russian state-owned banks, which are used as an instrument of industrial policy, Pilloux said: “We are aware of the weight of VTB and the other public-sector banks. We focus on private sector banks – but we work with the state banks, too.

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