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UPDATE 1-Kazakh BTA creditors form committee after bond default
January 17, 2012 / 4:50 PM / 6 years ago

UPDATE 1-Kazakh BTA creditors form committee after bond default

(Adds details, background)

By Sujata Rao

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 went 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 angry as they contend that BTA, which is 81.5 percent 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,” the group said in a statement.

“We are now entering a process of appointing a formal committee.”

At a news conference in Almaty earlier on Tuesday, BTA’s acting Chief Executive Officer Askhat Beisenbayev reiterated that the proposal for a debt moratorium would be voted on at a shareholder meeting on Jan. 26.

He said the coupon payment would be the next step following a restructuring.

“(The coupon) cannot be examined outside the context of the restructuring issue. This is the basic reason that this coupon cannot be paid, even should not be paid,” he told the meeting.

DEBT CLAIMS

The creditor group, which owns a quarter of outstanding 2018 BTA Eurobonds, warned that the default would damage Kazakhstan in the eyes of foreign investors.

The oil-rich country has received more than $120 billion in investment since independence in 1991.

“This development will undermine investor confidence in the Kazakh banking system and have a systemic impact. It also casts doubt over the government’s support of foreign creditors, despite the goodwill these creditors have shown in the past,” the group said.

Last week, the group told Reuters it was considering accelerating the entire $2 billion payment, which would enable other creditor classes also to demand immediate debt repayment from BTA.

This could trigger $8 billion worth of debt claims on the assumption that a BTA Eurobond default would allow other creditor classes to call in the debt they are owed.

The biggest single issue would be Recovery Notes (RN), issued during the 2010 restructuring, which have a reference or par value of $5.2 billion. (Additional reporting by Sebastian Tong in London and Mariya Gordeyeva in Almaty; Editing by Susan Fenton)

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