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By Carolyn Cohn and Sujata Rao
LONDON May 29 Kazakhstan's Alliance Bank,
majority owned by the country's sovereign wealth fund, said on
Thursday that talks with creditors had broken down on what would
be its second debt restructuring in four years.
The bank defaulted on debt in the aftermath of the global
financial crisis and restructured debt in 2010 but late last
year said it needed to recapitalise to restore profitability.
"Negotiations have broken down, no agreement was reached,"
Alliance chief executive Timur Isatayev told Reuters by
The bank met a creditor committee over the past two days and
offered improved terms compared with an initial debt
restructuring offer made in January, Isatayev said.
The bank's latest offer would imply a recovery rate of 40
percent, compared with an initial 30 percent offered in a debt
restructuring proposal made in January.
But one creditor, who spoke on condition of anonymity, said:
"The proposal that was made was way below expectations".
"Before they had offered 30 percent recovery, possibly in
cash. Now they are offering 40 percent, all in new bonds. On
balance it's probably worse. People are seeing it as a bit of a
joke," the creditor added.
Alliance is 51 percent owned by sovereign wealth fund
Samruk-Kazyna and 16 percent owned by Kazakh billionaire
Utemuratov, following a sale by Samruk-Kazyna of part of its
stake in recent weeks.
The banking sector of the oil-producing Central Asian nation
was hard hit by the global crisis due to its heavy external
borrowing and bloated real estate market.
BTA, another Kazakh bank controlled by Samruk, has also
restructured its debt twice.
"Creditors will be looking for 50-60 percent - 50 percent
was paid by BTA which was in a much worse condition," the
"Samruk has to step in and be more proactive."
The creditor committee includes JP Morgan and funds VR
Capital, Lim Advisers and Greylock Capital, Isatayev said.
Alliance's dollar bond due 2017 is trading
around 50 cents in the dollar, Thomson Reuters data shows.
Analysts said, however, that prices were likely to fall to
reflect the breakdown in talks.
(Editing by Ruth Pitchford)