UPDATE 2-Kazakh bank BTA seeks to slash debt by $8 bln

* Offers $1 bln debt buyback with 82.25 pct discount

* Other options involve rollovers, equity conversion

* Restructuring covers $10.3 bln of debt

* Aims to reduce debt by $8 bln

* Creditors have until Sept. 18 to review the offer

(Adds details)

By Olzhas Auyezov

ALMATY, Sept 7 (Reuters) - Kazakhstan's largest bank, state-run BTA BTAS.KZ, asked hundreds of its foreign creditors to cut its $10.3 billion debt by $8 billion to avoid bankruptcy, it said on Monday.

Analysts say resolving debt issues at BTA and smaller banks is crucial for the Central Asian state's efforts to recover from the global economic crisis.

"This is the proposal that has been made to creditors," Olga Vorobyova, the head of Investor Relations at BTA, told Reuters.

"The Financial Supervision Agency (Kazakh banking regulator) has set September 18 as the deadline (by which creditors must agree or reject the offer)."

Proposed debt restructuring options include cash buyback with a 82.25 percent discount, limited to $1 billion, BTA said in a presentation published on its website.

Two other options are a 7-year rollover at a discount of 60 percent with a 5-year grace period and reduced interest rates, and a 15-year subordinated rollover at par with a 10-year grace period and reduced interest rates.

The fourth option is equity conversion at a discount of 80 percent.

BTA said restructuring would apply both to principal and accrued interest and would include trade finance liabilities. The decision to restructure trade finance debt has already left other Kazakh banks cut off from such credit lines, bankers say.

RECOVERY HINGES ON BANKS

BTA, nationalised in February, went into default in April following demands by some creditors for accelerated debt repayment. The regulator has said that a failure to restructure debt could lead to BTA's bankruptcy.

The government has ousted BTA's former managers and blamed the bank's huge losses on their fraudulent operations, a charge they deny.

Another Kazakh bank, Alliance ALLBq.L, has offered similar debt restructuring options to its creditors this year and has yet to finalise the deal.

Both banks borrowed aggressively abroad before the global crisis to finance rapid expansion in the booming oil-driven economy.

Now that the economy is shrinking, many borrowers find it hard to repay debts and banks have little if any access to fresh funds.

The International Monetary Fund has said this year that in order to speed up recovery, Kazakhstan needs to resolve banking sector issues so that the wider economy starts receiving loans again. (Editing by David Cowell)