Kazakhstan to investigate bond acquisition from Azerbaijan's IBA

By Azernews

By Kamila Aliyeva

Kazakhstan's central bank will investigate the acquisition by the state-managed pension fund of $250 million worth of bonds in the International Bank of Azerbaijan (IBA) after the lender announced it would not repay some of its debts in full.

Azerbaijan's largest bank IBA has suspended payments on some liabilities and is seeking support from creditors to restructure more than $3 billion of debt.

The bank ran into problems in 2015 when bad loans built up. President Ilham Aliyev, on International Monetary Fund advice, ordered its balance sheet be cleaned up and the bank sold off, but no sale has occurred. The government has already taken over $5 billion in bad loans from the IBA.

Head of the National Bank of Kazakhstan Daniyar Akishev announced that after the internal audit, the materials will be transferred to the appropriate authorities for legal assessment

Kazakhstan’s National bank officials took a decision in October 2014 to acquire, via an offshore company and a closed subscription, IBA's 10-year bonds with a coupon paying 8.25 percent annually.

The National Bank of Kazakhstan is making maximum efforts to minimize negative consequences and has been negotiating with the.

The IBA said earlier that it hopes to complete the process of restructuring the $3.3 billion debt by the end of August.

The main creditors will be offered three options. The first provides for the exchange of sovereign debt with a 12-year maturity in three phases. The second option involves a one-on-one swap into 15-year sovereign debt while the third option is to stay with IBA, with bonds exchanged at par for a 7-year 3.5 percent issue.

"Together with the government we will choose the most secure restructuring option, from the risk point of view. However, all three options assume a loss and lost profit," Akishev concluded.

Net assets of the state pension fund of Kazakhstan, a Central Asian nation of 18 million, were at 6.8 trillion tenge ($22 billion) as of April 1.

Around 9 percent were invested into non-Kazakhstan sovereign debt papers, with some 3 percent of that exposure to non-Kazakh private companies' papers such as bonds.