UPDATE 2-Kazakh ruler tells wealth fund to sell bailed-out banks

Mon Feb 4, 2013 1:46pm GMT

(Refiles to remove duplication of Reuters Instrument Code (RIC)

* State spent billions of dollars to bail out crisis-hit banks

* Order to re-privatise banks by year-end puzzles analysts

* They say hard to find strong foreign buyers

* Say cash raised in sell-offs won't cover cost of bail-outs

By Mariya Gordeyeva

ALMATY, Feb 4 (Reuters) - Kazakh President Nursultan Nazarbayev has ordered the re-privatisation this year of three banks bailed out by the state's national wealth fund, the presidential news service said on Monday.

As a result of injecting billions of dollars in aid during the global financial crisis the Samruk-Kazyna fund now owns over 97 percent of BTA, the country's third-largest bank by assets, 67 percent of Alliance Bank , the eighth-largest lender, and 79.9 percent of Temirbank, 13th in order of size among the country's 38 banks.

Nazarbayev has now told the fund to sell its stakes in BTA, Alliance and Temirbank by the end of this year.

"We will now speed this process up," Yelena Bakhmutova, deputy head of Samruk-Kazyna told Reuters. "Now this order has been made we are ready to talk to potential investors," she said.

"Let's see; they (investors) may emerge," she said. "The year is only just beginning, BTA's restructuring is completed and Alliance and Temirbank show some improvements, albeit not to the extent that we would want to see."

BTA won creditor approval for its second debt restructuring in as many years at the end of 2012, aimed at cutting its debt of $11 billion by around 70 percent through a mix of write-offs and a debt-for-equity refinancing by Samruk-Kaznya which left the fund with more than 97 percent of the equity.

Meanwhile the bank, whose creditors include British lenders RBS, Barclays, Standard Chartered and HSBC, is pursuing its former owner, fugitive billionaire Mukhtar Ablyazov, in a $5 billion fraud trial in Britain.

The bank's current owner blames BTA's problems on Ablyazov, who fled Kazakhstan in 2009, while Ablyazov has said the allegations are designed to eliminate him as an opponent to Kazakhstan's powerful president, Nursultan Nazarbayev, a 72-year-old former steelworker who has ruled Central Asia's largest economy for more than two decades.

Nazarbayev's press service said he met with key economic officials on Monday when Samruk-Kazyna's head Umirzak Shukeyev told him that following the restructuring BTA's foreign debt has been reduced to $750 million from $9 billion and new management installed.

"In this respect, the head of state ordered (Samruk-Kazyna) to exit the capital of BTA, Alliance Bank and Temirbank during the current year," the press service said.

UNEXPECTED DECISION

The mechanism of how the state intends to re-privatise the three banks remains unclear.

Samruk-Kazyna had originally intended to sell its stakes in the banks within two years after the their nationalisation but would wait for a better price if needed.

Nazarbayev's order accelerating the pace of the sale puzzled some analysts watching the country's financial markets.

"I think it will not be easy to find strong foreign banks for (buying into) these Kazakh banks," said Armen Dallakyan, an analyst at rating agency Moody's.

"If the three banks are sold to local investors or other banks (local or foreign) with limited financial strength, this will reduce the likelihood of government support for these banks and may increase corporate governance risks."

Mikhail Nikitin, an analyst at VTB Capital, said that a sale was unlikely to make a profit for the state.

The sale is theoretically possible, he said. "As far as I understand, this is linked to the (authorities') willingness to reduce the foreign debt of Samruk-Kazyna and its companies, but here ... it all hinges on the terms of the deal," he said.

The head of Alliance had told Reuters in an interview on Jan. 25 that Samruk-Kazyna would decide in February whether to merge Alliance and Temirbank to create what would be one of the country's five biggest banks.

However, Bakhmutova said on Monday that should the opportunity arise the fund would be prepared to sell its stakes in Alliance and Temirbank separately.

"If investors appear right now, then that would be welcome; we are ready to negotiate with them," she said.

In April 2009 Alliance became the first Kazakh lender to default on its debt, citing management fraud and bad loans. It completed its restructuring in March 2010, with debt cut to $1.1 billion from $4.5 billion.

On July 1, 2010, Temirbank completed its debt restructuring, a year after Samruk-Kazyna had taken a majority stake in return for financial aid. (Writing by Dmitry Solovyov; Editing by Greg Mahlich)

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