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Deal Maker of the Year Awards 2013
WINNER - HOULIHAN LOKEY DEAL: BTA Bank $11.1bn Restructuring
COMPANY: Houlihan Lokey WEBSITE: www.hl.com
UK
DEAL OVERVIEW Q restructuring?
What was the background to the
In 2009, BTA Bank J.S.C., then the #1 retail and corporate bank in Kazakhstan, was forced to restructure $12.2bn in external financial indebtedness after taking significant provisions on its loan book following the discovery of fraud by senior management. This first restructuring resulted in $6.0bn in creditor writedowns and left sovereign wealth fund Samruk-Kazyna the owner of 81.5% of the bank in exchange for a $5.9bn capital contribution.
Post-restructuring, BTA failed to recover its prior market position, and in Q1 2012 the bank defaulted on the second ever interest payment due on its newly restructured debt and announced that, under its existing capital structure, the bank would be facing a $6.0bn capital hole by year end 2012.
Houlihan Lokey acted as a financial advisor to BTA’s 10 member Steering Committee.
Q Q
What challenges were presented and how were these overcome?
Given the size of the capital hole, maximising creditor recoveries hinged primarily upon negotiating a higher capital contribution from Samruk-Kazyna. This was made all the more challenging by BTA’s previous failed government bail-out: liquidation of the bank
What was Houlihan Lokey’s role in the transaction?
was a real and credible threat. In the end, we were able to negotiate a $2.8bn capital contribution by Samruk, of which $1.6bn was cash by way of a deeply subordinated loan. This was essential to meeting the objectives of bondholders who had decreased confidence in the bank’s business plan coming out of a second round restructuring. In the final transaction, senior bondholders received more than 95% of their recovery in day one cash, as compared to the company’s initial proposal in which bondholders’ full recovery was in the form of restructured BTA bonds.
In parallel to debtor-side negotiations, Houlihan Lokey mediated some equally difficult discussions between the diverse creditor constituencies represented on the
FIRM PROFILE
Houlihan Lokey is an international investment bank with expertise in mergers and acquisitions, capital markets, financial restructuring and valuation. The firm serves corporations, institutions, and governments worldwide with offices in Europe, the United States, and Asia. Independent advice and intellectual rigour are hallmarks of our commitment to client success across our advisory services. Houlihan Lokey is ranked globally as the No. 1 restructuring advisor, the No. 1 M&A fairness opinion advisor over the past 10 years, and the No. 1 M&A advisor for U.S. transactions under $3 billion, according to Thomson Reuters. For more information, please visit www.HL.com
Steering Committee which included original par lenders, opportunistic secondary players, public sector agencies and trade finance creditors. Resolving complex intercreditor conflicts was as instrumental to the success of the transaction as was negotiating with the company and Samruk.
The deal that was eventually struck significantly exceeded market expectations for both the bank’s Recovery Units and Senior Bonds: recoveries for these classes were approximately 2.5x their market value when the Steering Committee was formed. At the same time, the restructuring also achieved trade finance and public sector creditors’ objectives with the delivery of restructured debt that preserved the nominal amount of their claims.