Page 19 - bne_newspaper_June_16_2017

Eurasia
June 16, 2017 www.intellinews.com I Page 19
Kazakh pension fund to receive “no special treatment” in IBA restructuring
bne IntelliNews
Kazakhstan’s state-run pension fund, trapped in the debt restructuring being pursued by state-run Azerbaijani lender International Bank of Azerbai- jan (IBA), will receive “no special treatment” and will be treated on a par with other senior creditors of the bank, Reuters reported on June 13, citing an unnamed person familiar with the restructur- ing plans.
The pension fund holds $250mn worth of debt owed by IBA. In a private placement made in October 2014, the fund bought a bond issued by IBA, which defaulted on its foreign debt in mid-May.
Though Kazakhstan has so far not officially joined any creditor group, notes held by the Kazakh pen- sion fund place it in the category of IBA creditors required to swap their holdings for longer-dated paper or take a writedown.
Both the ex-Soviet Central Asian countries have been greatly undermined by low oil prices in the past couple of years and IBA essentially stands as one of the biggest casualties of the slump in the value of hydrocarbon exports. The bank, Azerbai- jan's largest, now wants to restructure $3.3bn in debt, but the Kazakh pension fund finds itself in
a predicament as assessments by ratings agen- cies estimate that up 20% in creditor losses follow such a restructuring.
Moreover, the Single Accumulated Savings Fund has previously been subject to public criticism in Kazakhstan as Kazakh authorities have used its finances to support the recently launched EXPO 2017 international fair. In mid-2016, the Kazakh authorities also drew from the pension fund to provide a stimulus to the ailing economy as a result of the low oil prices.
The pension fund, established in 2013 to nationalise the private pension funds in the country, has about $22bn in central bank-managed retirement savings as well as bond holdings of Kazkommertsbank (KKB), the largest Kazakh lender. Second biggest lender Halyk Bank is preparing to buy a controlling stake in KKB following a planned $7.5bn state bailout of the top bank.
IBA accounts for a third of Azerbaijani banking sector assets. The troubled lender was rescued from the brink of default by the government in 2015, and was set to be privatised. The announce- ment of its debt restructuring came as a shock to creditors and clients alike, and is believed to be an attempt by Azerbaijani authorities to obtain con- cessionary terms on its outstanding debt.
The Kazakh pension fund is among a long roster of creditors and clients that will be affected by IBA's default, together with US food giant Cargill, Citi- bank and Azerbaijani sovereign wealth fund Sofaz.