The action by BTA - once the largest privately-owned bank in the Commonwealth of Independent States (CIS) - follows demands from some creditors to accelerate their repayments, in view of “change of control” clauses in their loan agreements.
The state holding company and investment fund Samruk-Kazyna purchased 75% of BTA’s shares in February after the bank breached the local regulator’s liquidity and capital requirements. This prompted investors to take legal advice on whether the move constituted a change of control. On a conference call with investors on March 24, the bank’s new chairman Arman Dunaev, who is deputy chairman of Samruk-Kazyna, warned that the fund would not finance early repayments to individual creditors before a full debt restructuring proposal had been implemented for all creditors.
After Alliance Bank - which was also bailed out by Samruk-Kazyna - defaulted earlier in April, BTA’s new CEO, Anvar Saidenov, gave assurances that BTA would continue to service its own debt until it had presented a full restructuring plan to creditors. The due diligence for this proposal was conducted by Goldman Sachs and UBS, together with law firm White & Case, and was originally due for completion on April 20.
However, its presentation appears to have been delayed by the possible purchase of the entire bank, or some part of it, by Russia’s largest lender, the state-owned Sberbank. BTA’s new board apparently agreed to postpone publication of the report by the bank’s advisors until Sberbank had completed its own due diligence, expected in early May.
Curtis Masters, financial services partner at law firm Baker & McKenzie in Almaty, set out the dilemma for creditors. “An acceleration could have disastrous effects for everybody and cause the bank to collapse, so the counterparties have shown restraint and patience, but I imagine that patience is not unlimited,” he warned.
BTA Bank’s Eurobonds are now trading at 15-20 cents on the dollar. The bank’s management say they are remaining current on the bonds by continuing to make coupon payments – the same approach used by Alliance Bank. However, one emerging market debt investor said this is not the normal technique in a restructuring situation. “If you do not have enough funds to repay principal and you are going into a restructuring, why continue paying funds away on the coupons? It does not make sense, unless some of the creditors wanted to maintain their cash flow, so they asked the new management to keep paying the coupons,” he said.
For the full story of BTA’s recovery plan, including an interview with Mr Saidenov, look out for “Bruised and battered, but ready to move forward” in the May 2009 issue of The Banker, and available online from May 6.
