ALMATY, Aug 4 (Reuters) - Kazakhstan’s mid-sized Alliance Bank has agreed a preliminary deal with creditors aimed at restructuring around $1.2 billion of its debt and paving the way for a planned merger with two smaller lenders.
The restructuring, the bank’s second in four years, will cut the nominal value of creditors’ existing bond holdings by around a half to $300 million, analysts said.
The banking sector of the vast, oil-producing nation of 17 million was hard hit by the global financial crisis due to its overexposure to external borrowing and a bloated real estate market.
Alliance is 51 percent controlled by Kazakhstan’s sovereign wealth fund Samruk-Kazyna and plans to form a combined bank with two smaller banks controlled by Kazakh billionaire Bolat Utemuratov - Temirbank and ForteBank.
“We believe that the restructuring will provide the bank with the restored capital base and liquidity necessary for its consolidation with Temirbank and ForteBank,” Alliance Bank Chief Executive Timur Issatayev said in a statement on Monday.
“We hope to complete the restructuring and the legal consolidation of the three entities by the end of 2014.”
Alliance, the Central Asian nation’s 10th-largest bank by assets, said creditors would be able to swap their existing notes for packages of “New Notes”, equity in the new, combined bank, and cash.
The New Notes will have a principal of $236.6 million, to be paid in 16 equal semi-annual installments, with a semi-annual coupon of 11.75 percent a year and maturing ten years after the closing date.
“We estimate that the degree of recovery for debt holders in this restructuring equals approximately a half of the nominal value of the notes which they are holding,” Bakay Madybayev, analyst at Halyk Finance investment company, said.
“Today the nominal value of the debt, which does not include the recovery notes ... is worth around $600 million,” he said.
Alliance Bank said that holders of its notes maturing in 2017 will receive $50 million in cash, $175.6 million in New Notes and equity in the combined bank worth about $61.4 million.
Holders of Par Notes due in 2020 will receive $8.1 million in cash, $61 million in New Notes and equity in the combined bank worth around $21.4 million.
Holders of recovery notes due in 2020 will receive $41.8 million in cash, while holders of subordinated notes maturing in 2030 will receive equity in the combined bank worth $6.7 million, Alliance said.
Samruk-Kazyna said it will support the transaction by converting 66.3 billion tenge ($364 million) of existing and at least 11.9 billion tenge ($65 million) of new deposits with the bank into a 10-year “Special Term Deposit” bearing interest of 4 percent annually. (Reporting by Mariya Gordeyeva; Writing by Dmitry Solovyov; Editing by Erica Billingham)