Astana Finance defaults on foreign and domestic debt

business and economy

Astana Finance defaults on foreign and domestic debt

By SRI ⋅ May 19, 2009 ⋅

(SRI) - Astana Finance has suspended repayments of its domestic and international debt on Tuesday and became the third Kazakh lender to default on its loans and to seek debt restructuring.

Astana Finance, a non-banking financial institution which has a licence to lend but does not take retail deposits, said it froze payments after its financial position deteriorated and some loan schedules were accelerated due to credit ratings downgrades.

In a statement, the company blamed the tenge devaluation, fall real state prices in Kazakhstan, lack of liquidity and overall deterioration of Kazakhstan’s economy for degradation of its loan portfolio and losses related to exchange rate and derivative transactions.

“The suspension of payments will ensure equal rights of all creditors and give [Astana Finance] time to assess the situation and present a plan for restructuring, which will be equitable with regard to investors and secure the long-term financial recovery of the company,” Astana Finance said in a statement.

The company said it expects a financial and legal audit to take up to twelve weeks, and its results will form the basis for a restructuring plan which will be presented to the authorities, and the company’s creditors and investors. Meanwhile, it appointed J.P. Morgan Securities as its restructuring advisor, Clifford Chance as its international legal advisor and First Legal as its Kazakhstan legal advisor.

The company is an active player in the mortgage and leasing sectors, mainly in Astana and the surrounding Akmola region, but also provides various investment banking services. Its total foreign debt reportedly amounts to $1.2 billion. Earlier this year, Astana Finance was rumored to be interested in acquiring RBS Kazakhstan, the local subsidiary of the global banking giant.

Kazakhstan’s government reportedly owns 18.1 percent of the company’s shares.