Temirbank Default followed Four-Fold Rise in Bad Loans

    Temirbank, a unit of BTA Bank, Kazakhstan’s second-biggest lender by assets, said its decision to default last month came after the value of bad loans on its books quadrupled, a Temirbank managing director said.
    Temirbank’s bad loans soared to 80.6 billion tenge ($543 million) in the third quarter from 22.2 billion tenge in the second, according to a filing on the Kazakhstan Stock Exchange Web site. Erulan Kusainov said the increase followed the bank’s third-quarter decision to halt extensions made on “masses” of loans in 2008.
    Loan extensions that expired in the third quarter weren’t renewed when Temirbank “saw that there would be no sharp improvements in the market,” Kusainov said in an interview today.
    At the same time, the Financial Supervision Agency made a “new estimate” of the bank’s assets; prompting it to increase bad-loan provisions, he said.
    Temirbank defaulted last month, pushing to $20 billion the amount of debt Kazakh lenders are seeking to restructure. BTA Bank, Alliance Bank and AO Astana Finance defaulted in April and May after credit markets froze and Kazakhstan’s property bubble burst.
    Almaty-based Temirbank said on Nov. 23 that it planned to restructure 211.8 billion tenge of debts after “substantial deterioration” of its loan holdings.
    Temirbank, Kazakhstan’s 10th-largest lender, made the decision to restructure its debt in October and set a “world record” for speed in preparing for the procedure, Mukhtar Bekkali, another Temirbank managing director, told reporters in Almaty today.
    Offer to creditors
    The bank in November offered to pay 19.7 cents on the dollar to holders of $300 million of senior notes due 2011. It proposed paying 20.03 percent of face value on $500 million of notes due 2014. Temirbank said holders of both securities would receive an additional $10 per $1,000 of principal if they accepted the offer by 5 p.m. on Dec. 15, but later canceled this offer.
    Temirbank last week said it would make a 20 percent stake in the company available to the bondholders as well as $60.75 million of new bonds in addition to its cash offer.
    The state-run National Wellbeing Fund Samruk-Kazyna will inject 23 billion tenge to obtain a 79 percent stake in Temirbank as part of the restructuring deal, Chief Executive Officer Erzhan Shaikenov told reporters today. The money will be spent to pay creditors, he said. Temirbank had assets of 188 billion tenge as of Dec. 1, according to the Agency for Financial Supervision.
    Temirbank will add 10 billion tenge to 122 billion tenge of provisions made by December, Shaikenov said.
    BTA, which owns 55.6 percent of Temirbank, will hold less than 1 percent after the restructuring, when the lender’s capital will be about 30 billion tenge, Shaikenov said. Samruk- Kazyna took control of BTA in February.
    Government to support Export-Oriented Enterprises - Masimov
    The government of Kazakhstan plans to support export-oriented enterprises under the program for forced industrial and innovation development, Prime Minister Karim Masimov announced at a meeting with the members of the Kazakhstan Engineering Workers' Union on Wednesday.
    He said if enterprises have secured contracts, the government should search for resources and help them.
    "All countries do this, and we should do the same. If the enterprises find their export and return their added value to the country, we should assist them in it", the premier noted, Kazinform reports.