Kazakh BTA creditors forming committee after bond default

LONDON Tue Jan 17, 2012 11:17am EST

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LONDON Jan 17 (Reuters) - An ad hoc group of creditors holding Eurobonds issued by Kazakhstan's BTA Bank said on Tuesday they would appoint a formal committee after the bank missed a 10-day grace period to pay $160 million in bond coupons and fell into official default.

The default on the bank's $2 billion 2018 Eurobond comes just 18 months after a first round of restructuring cut the bank's debt by two-thirds. Investors are enraged as they contend that BTA, owned by Kazakhstan's $78 billion sovereign wealth fund, has enough money to pay debt.

"The ad hoc group of senior creditors is very disappointed that BTA has chosen not to pay the coupon despite the fact that it has ample liquidity to do so. We are now entering a process of appointing a formal committee," the group said in a statement.

The group, which owns a quarter of outstanding 2018 BTA Eurobonds, told Reuters last week it was considering accelerating the entire $2 billion payment, which would enable other creditor classes also to demand immediate debt repayment from BTA. That could trigger $8 billion worth of debt.

The creditors said the default would damage Kazakhstan in the eyes of foreign investors. The oil-rich country has received over $120 billion in investment since independence in 1991.

"This development will undermine investor confidence in the Kazakh banking system and have a systemic impact," the statement said. "It also casts doubt over the government's support of foreign creditors, despite the goodwill these creditors have shown in the past." (Reporting by Sujata Rao; editing by Sebastian Tong)

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