* BTA bank agrees term sheet on 2nd restructuring since 2010
* Wealth fund to issue $1.59 bln subordinated loan, up stake
* Investor, analyst say deal implies 55 pct haircut
* Agreement triggers rally in discounted bond
(Adds investor comment, details)
By Robin Paxton and Carolyn Cohn
ASTANA/LONDON, Oct 3 Kazakhstan's sovereign
wealth fund has rescued the country's No.3 bank for the second
time in as many years, forging a deal to cut the bank's $11.2
billion of debt that will see its majority stake rise and
creditors lose less than feared.
The deal triggered a rally in the heavily discounted bonds
of the bank - BTA - as creditors will recover more of
their outlay than seemed likely when BTA defaulted in January.
BTA was the largest of Kazakhstan's banks to default in 2009
after the financial crisis struck Central Asia's largest economy
and laid bare the banking sector's exposure to bloated real
estate markets and its over-reliance on external funding.
In its first restructuring in 2010, BTA cut its net debt by
two-thirds to $4.2 billion in a deal that installed the wealth
fund, Samruk-Kazyna, as an 81.5-percent shareholder.
The fund failed, however, to find a buyer for its stake and
later upset creditors who had expected more tangible support. It
did not guarantee BTA's debt and the bank, plagued by persistent
bad loans, defaulted this year on a $2.1 billion bond due 2018.
The bond, itself a product of the previous restructuring,
jumped at least 10 cents to more than 35 cents on the dollar
after Wednesday's deal was announced. It had traded as low as 16
cents on the dollar in early September.
One investor, who declined to be identified, said the terms
of the deal implied creditors would be asked to write off around
55 percent of their investments, depending on the paper held.
"The terms are so favourable to investors, relative to
expectations, that there is no reason for anyone not to accept
it," said Richard Segal, analyst at Jefferies. "Not only that:
it's mostly cash."
The deal includes a $1.59 billion subordinated loan for BTA
from the wealth fund.
Every member of a creditors' committee except Nomura
International agreed to a package which will include some cash
for creditors and new notes with a nominal amount of $750
The notes would have a semi-annual coupon of 5.5 percent per
year and mature in 2022, BTA said in a statement. Chief
Executive Yerik Balapanov said he hoped the restructuring would
be completed by the end of this year.
Senior noteholders would receive $957.8 million in cash and
$88.8 million of new notes, BTA said.
Holders of recovery notes issued to some creditors during
the previous debt restructuring - which were supposed to pay out
whenever BTA recovered a certain level of lost assets - would
get $660.2 million in cash and $61.2 million of new notes.
BTA is pursuing its former owner, fugitive billionaire
Mukhtar Ablyazov, whom it accuses of embezzling at least $5
billion from the bank before he fled Kazakhstan the same year.
An outspoken critic of Kazakh President Nursultan
Nazarbayev, Ablyazov was granted political asylum in Britain and
has said the charges are politically motivated.
Fraud claims were due to be heard in the High Court in
London in November, but Ablyazov is believed to have fled
Britain in February after being sentenced to 22 months in jail
for contempt of court. His current whereabouts are unknown.
In a letter to shareholders, BTA said Samruk-Kazyna would
convert deposits into equity at a sufficient level to achieve
the minimum 10 percent Tier 1 capital ratio required under Basel
The bank did not say what the wealth fund's stake would be
after the latest restructuring.
Data from Kazakhstan's financial regulator showed BTA had a
negative capital - where liabilities exceed available assets -
of $8.2 billion as of Sept. 1. The bank announced in March that
it would cut around 1,500 jobs, or 25 percent of its workforce,
in an attempt to reduce losses.
(Additional reporting by Mariya Gordeyeva; Editing by Mark