BTA’s ownership dispute with Ukrainian subsidiary heating up

analysis

BTA’s ownership dispute with Ukrainian subsidiary heating up

By SRI ⋅ June 25, 2009 ⋅

(SRI) - The ownership dispute between Kazakhstan’s BTA Bank and its Ukrainian subsidiary is heating up, as BTA seeks to reverse a deal that reduced its stake in the Ukrainian lender from 49.99 percent to 9.99 percent.

In April, BTA Bank (Kyiv) reported that its parent company cut its share in the Ukrainian lender to 9.99 percent from 49.99 percent. The Kazakh bank has refused to acknowledge the deal, however, and maintains it was performed illegally and without its knowledge. The Ukrainian bank’s shareholders also attempted to rename the bank to AMT Bank, ostensibly to sever all ties to its parent bank.

Judging by thin-veiled statements issued by BTA, the bank suspects that the machinations are the work of entities related to the bank’s former chairman Mukhtar Ablyazov, currently living in exile in London and wanted in Kazakhstan on charges of various financial crimes.

“On January 28, former deputy of Mukhtar Ablyazov, Zhasylyk Zharimbetov, exceeded his authority, and, without the approval of BTA Bank’s board of directors, annulled the acquisition of 40 percent of BTA (Kyiv)’s shares. As a result, the shares have been transferred to Lakeland Investment, Impuls Capital Investment, Goldfein Import Investment and Dobro Trade Investment,” Interfax quoted BTA’s statement.

BTA is Kazakhstan’s largest bank, and prior to the government takeover in February, it loudly proclaimed its goals to become one of the premier financial institutions in the CIS, if not the world. To achieve this goal, the bank went on a massive expansion spree which saw it snap up assets in nearly every former Soviet state but also in the UAE, China and Turkey.

The bank acquired a 9.99-percent stake in Ukrainian Credit and Trade Bank in June 2006 and subsequently changed its name to BTA (Kyiv). However, in January 2009, shortly before being taken over by the government’s investment vehicle Samruk-Kazyna, the Kazakh bank said it acquired another 40-percent share in its Ukrainian subsidiary bringing its total stake to 49.99 percent. The bank did not disclose the sellers of the 40-percent stake. The bank also appointed new supervisory board member consisting of what were considered loyal lieutenants including BTA’s former CEO Roman Solodchenko.

According to BTA’s current management led by former central banker Anvar Saidenov, the bank’s former deputy chairman Zharimbetov then reversed the deal only days later and just prior to the government takeover on February 2.

Given the timing of the transaction (or lack thereof) and the notorious opaqueness of the ownership structures of BTA’s foreign subsidiaries, a number of analysts expressed concerns of asset stripping amid the turmoil of the government takeover of the bank. Others suggested that BTA’s former management may have attempted to wrestle away control over the bank’s foreign subsidiaries by quietly transferring assets to opaque investment vehicles registered in exotic offshore locations.

On Monday, BTA issued a statement accusing the Eurasia Investment and Industrial Group (Eurasia), a Russian real estate developer affiliated with BTA’s former president Mukhtar Ablyazov, in sabotaging a June 15 shareholder meeting of its Ukrainian subsidiary. The statement stopped short of accusing Ablyazov of trying to steal BTA’s 40-percent stake in the Ukrainian bank but clearly insinuated that the disgraced banker has been the force behind BTA (Kyiv)’s attempts to disavow its parent institution.

According to the Kazakh bank, representatives affiliated with Ablyazov’s Eurasia (and apparently owning shareholder interests in BTA’s Ukrainian subsidiary) failed to appear despite having initiated the meeting. The meeting subsequently failed due to a lack of quorum.

Meanwhile, BTA (Kyiv), not to be outmaneuvered, countered with its own charges accusing the Kazakh of corporate raidership and warning that the dispute could throw Ukraine’s entire banking system in turmoil. According to Natalia Sergeeva, the vice-chair of the BTA (Kyiv) bank, the Kazakh bank’s actions may lead to a deepening of financial instability in Ukraine and deterioration of its investment climate.