LONDON Oct 8 Bonds in Kazakhstan's Alliance
Bank tumbled almost 10 cents on the dollar on Tuesday to record
lows on fears the lender, owned by the country's sovereign
wealth fund, is headed for its second debt restructuring in
Alliance, owned 67 percent by sovereign fund Samruk Kazyna,
was one of several banks in oil-rich Kazakhstan to default on
debt after the 2008 financial crisis, and another Samruk-owned
bank, BTA, has already restructured a bond it issued after its
first 2009 default.
Fears are growing that Alliance will have to do the same
with its 2017 $615 million bond, which is trading
around 40 cents on the dollar, with a yield of over 70 percent.
Officials at Alliance could not be reached for comment.
Alliance posted a 4.3 billion tenge ($28 million) net
pre-impairment loss for 2012 while Fitch estimated earlier this
year the bank's debt repayments would amount to almost $500
million between 2014 and 2017 while liquid assets were just over
The Kazakh banking sector suffers high levels of problem
loans which analysts blame on a weaker than expected economic
recovery since the financial crisis.
As recently as May, the $615 million bond, issued in 2010 as
part of a debt restructuring deal, was quoted at 93 cents, while
a month ago it was at 69 cents.
"The expectation is they may do a second restructuring round
to restore their capital adequacy ratio. A coupon was due (last
week) and they did pay it but they must have used most of their
cash on it," a London-based fund manager said.
Alliance's Tier I ratio, according to Basel I, rules was 2.7
percent earlier this year and its capital adequacy ratio was
less than 5 percent.
The bond has been weakening ever since May, when Fitch
downgraded its credit rating to CCC, noting that a new
restructuring round was a "real possibility".
One investor attributed the latest steep drop in prices to a
big fund liquidating its position.
"It's pretty clear that recapitalisation would involve
restructuring the various obligations," the investor said.
There has also been uncertainty about the future ownership
of the bank. Samruk-Kazyna is trying to sell its stakes in
A senior government official told Reuters that a decision on
selling a controlling stake in Alliance would be taken in the
next few days, naming Kazakh billionaire Bolat Utemuratov as the
Utemuratov is dubbed a "grey cardinal" in local media for
his connections with Kazakhstan's political and business elite.
His office was not available for comment.
($1 = 154.1800 Kazakhstan tenges)
(Reporting by Sujata Rao in London and Masha Gordeyeva in
Almaty; Editing by David Cowell)