Clare Nuttall in Almaty -
Kazakhstan's BTA Bank has signed a new agreement on restructuring its $12bn debt with the committee representing its creditors. A conclusion to the restructuring process is finally in sight, with creditors due to vote on the revised agreement on May 31.
Efforts to recover billions of dollars alleged to have been embezzled from the bank also moved forward with the arrest of four top officials from Russia's Eurasia Logistics, who are accused of complicity in embezzling around $2bn.
Under the revised agreement published by BTA on March 17, the majority of creditors are set to receive an 18.5% stake in the bank, up from the 15% they would have been given under a previous agreement signed on December 7.
Under Senior Package 1, the creditor category that applies to most of BTA's bondholders, creditors will receive a combination of cash, newly-issued senior debt and subordinated debt, equity, and recovery notes. "We expect positive impact for BTA Bank bonds, because we believe the new terms for senior unsecured debt holders exceed previous market expectations, and because we believe the market will perceive a lower level of uncertainty in the restructuring process," Visor Capital writes in an analyst note.
It is intended that creditors will participate in the recovery of BTA, says Marcia Favale-Tarter, adviser to Kazakh Prime Minister Karim Massimov. "Throughout the process there was great care to address the needs of different creditor classes, within the restructuring parameters, and to increase recovery levels for all investors," Favale-Tarter tells bne. "As per the commercial term sheet, investors are provided equity and recovery notes so that they will participate in the recovery of BTA. The steering committee is very important in terms of the process and it follows that we are cognisant of the need to have investor buy-in."
Although the terms have been approved by the creditors steering committee, approval from creditors is still needed. Creditors are due to vote on whether or not to accept the terms at a meeting on May 31 - two months later than the meeting originally scheduled for March 31. "These principal commercial terms will be supplemented in due course by detailed terms and should not therefore be considered to be definitive," BTA said in a statement issued on March 17. "The document is not binding on any financial creditor and the Restructuring will be subject to various approvals, including approval by a creditors meeting pursuant to applicable Kazakhstan law."
BTA also announced that it's starting an adjudication process for trade finance claims, including those owed to or guaranteed or otherwise covered by export credit agencies. The process will be carried out by the law firm Watson, Farley & Williams.
BTA and Kazakhstan's fourth largest bank, Alliance Bank, were nationalised in February 2009, to prevent their collapse. Alliance's creditors approved a restructuring package in December 2009. The restructuring of two smaller financial institutions, Astana Finance and BTA subsidiary TemirBank, is still ongoing.
BTA's former chairman Mukhtar Ablyazov and other former top officials are accused of embezzling billions of dollars from the bank. Ablyazov, who left Kazakhstan soon after BTA's takeover by the government to avoid arrest, denies the accusations and claims the takeover was politically motivated.
In August, the High Court of England froze the assets of Ablyazov and other former BTA managers in response in response to an embezzlement claim from BTA. Further claims are expected as the new team seeks to recover the lost assets. "We have employed Lovells and an independent advisor - John Howell - to help with the asset recovery process, specifically," Favale-Tarter says. "The approach is that this process must be evidentially driven. We are pursuing this in the UK, through impartial courts, where we have already had some success."
On March 19, Russian police arrested four top officials from property developer Eurasia Logistics. Director general Alexander Volkov, financial director Artyom Bondarenko, economics director Alexei Belov and the head of the company's juridical department Denis Vorotyntsev were arrested on charges of complicity in embezzling a loan worth around $2bn. According to sources cited by Kommersant, the embezzlement is believed to have been organised by Ablyazov.
The BTA loan had been provided for several investment projects in Russia, the largest of these being the construction of 9.1m square metres of real estate in Konstantinovo in the Moscow region, including a business park, a large medial centre, an academic campus, media and exhibition centres, and a race track. Interfax reports that police raided BTA's Russian branch on the same day, part of the fraud investigation.
According to Favale-Tarter, the strategy during the restructuring of both BTA and Alliance has been to ensure that the banks emerged as operationally viable post-restructuring. "The way we approached the insolvency of the bank was to look at the bank's recapitalisation needs and regulatory or prudential requirements post-restructuring; this is from where the debt reduction or the amount of needed write-offs are derived re plugging the hole," she says. The process of restructuring the bank is done with a view to make the bank operationally viable in future."
Once the restructuring is completed, a sale of part or all of BTA to Russia's Sberbank is still on the cards, though by no means a done deal. However, nothing is being seriously discussed until a decision on the restructuring is made. "I understand that there is an open line of conversation with Sberbank over the possible future sale of BTA, however, at this point there is nothing concrete. Overall there will be no firm interest until the bank is fully restructured," Favale-Tarter tells bne. "The intention is that any sale should be profitable for investors."
Should Sberbenk take over BTA, it will be a major advance for the Russian bank in a market that has until now been more open to western banks. Although Sberbank already has a foothold in Kazakhstan through its acquisition of Texakabank in 2006, its presence is relatively small, as is that of fellow Russian banks Alfa and VTB.
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