Uncertainty around the bank’s financial situation and the lack of progress in negotiating a restructuring agreement.
BTA Bank said on Friday its creditors could face losses of up to 97 percent, as the bank’s financial situation continues to deteriorate while it struggles to progress in its restructuring process.
In a presentation posted on its website on Friday, BTA said it would offer its creditors three options to at least partially recoup their investments. Under the first option, investors would be offered a discounted cash buy-back with haircuts ranging from 55 percent to 97 percent, depending on the financial situation of the bank and whether trade finance debt would be included in the restructuring or not. This option would require a participation of at approximately 50 percent of all creditors but would be capped at $1 billion.
The second option would allow BTA to roll over the debt at reduced interest rates. For this option, the maximum sustainable amount of participation is estimated at 35% of the creditors base. The third option, which would require the participation of around a fifth of all creditors, would be a debt-to-equity conversion.
Under the first option, the 66 percent haircut figure, or 55 percent if taking trade finance into account, reflected BTA’s financial position as of June 30 and the conversion of a $4.3 billion state loan into equity, the bank said. The 97 percent estimate, or 80 percent with trade finance, was based on a “stress case” implying additional losses losses. BTA said it was not yet clear if trade finance debt would be restructured.
“Negotiations on the final structure of the menu of options will start with the Global Steering Committee after KPMG produces a preliminary due diligence report, and will reflect the revised strategic and financial business plan of BTA Bank,” BTA said without providing any exact dates.
Separately, BTA also announced that it stopped servicing the interest of its $12-billion debt. It has ceased repaying the principle since April.
Analysts negatively assessed the Friday news citing the uncertainty around the bank’s financial situation and the lack of progress in negotiating a restructuring agreement.
“[Investors] have to re-price the probability of a full-fledged liquidation of BTA and the obvious systemic implications in terms of real economy impact,” Reuters quoted Commerzbank analyst Luis Costa as saying.
BTA’s liabilities consist of $2.384 billion in loans (commercial, bilateral and IFI), $6.206 billion in bonds (Eurobonds and domestic bonds), trade finance ($3.555 billion) and derivatives ($7 million). Among its biggest single lenders are Credit Suisse with $500 million outstanding, Standard Bank with $100 million outstanding, and German DEG with $74 million outstanding.
In additional, institutional investors make up 76 percent of registered bondholders, while retail investors account for 24 percent.