LONDON May 16 Bonds in Kazakhstan's BTA bank
extended recent sharp losses on Monday, with the 2025 issue
trading at a record low 56 cents on the dollar, following recent
results which some said had disappointed investors.
BTA BTAS.KZ, the biggest of the four Kazakh banks to
default in 2009, underwent a high-profile debt restructuring
last year and is now 81 percent owned by sovereign wealth fund
It said on May 12 it had returned to profit in 2010, though
analysts and investors said this was mostly fuelled by gains
following the restructuring and showed a slower-than-expected
pace of recovery for BTA's banking operations.
The sell-off, which started some weeks ago in the run-up to
the results, has hit bonds across the BTA curve, forcing yields
on the $500 million 2025 bond to almost 15 percent. That is a
rise of over 250 basis points since early May KZ053299067=.
The bond was down by almost 7 points in price on Monday
while the 2018 issue was down to 97.5 cents from 105 at the
start of the month KZ053298877=.
Alain Defise, who runs a corporate debt portfolio at JP
Morgan Asset Management, said the consensus had turned firmly
against BTA following the results announcement.
"Investors are disappointed and now believe everything that
management and Samruk-Kazyna communicated before was too
optimistic. The key question is to what extent Samruk-Kazyna
will support the company," Defise said.
Bond traders in London reported that several funds had
offloaded BTA debt late last week, sucking in more sellers.
The rout is also showing signs of spilling into other Kazakh
banking names, with credit default swaps in Kazkommertsbank
KKGB.KZ, the country's No.1 private bank, rocketing to 675
basis points in the past week from 550 bps, data from Markit
Kazkommertsbank's recent 2018 dollar bond has fallen to 95
cents on the dollar from 99.5, as investors used the bank as a
proxy for Kazakh risk.
BTA securities have been weakening in recent weeks on
speculation the results may be worse than expected but the
sell-off escalated last week.
The bank confirmed on May 12 that it had an equity deficit
of 104.5 billion tenge ($717 million) at the end of 2010, albeit
reduced from 1.69 trillion at the end of 2009.
"The net interest margin is probably negative on a cash
basis. This means it's burning the cash injected by the state in
its capital," said Mikhail Nikitin, analyst at Russian
investment bank Renaissance Capital.
"In its current situation, the bank is fully on life support
from the Kazakh authorities. It may continue in this state for
another year, or maybe even longer," Nikitin said, adding
investors wanted more clarity on underlying asset quality and
Samruk-Kazyna's willingness to provide further support.
BTA declined immediate comment.
(Reporting by Sujata Rao and Carolyn Cohn in London and Robin
Paxton in Almaty)