Baker & McKenzie advises on landmark bank debt restructuring
Firm advises BTA Bank's Steering Committee on CIS region's largest ever bank restructuring
Munich/London/Almaty/Moscow, 8 September 2010 - A multi-office Baker & McKenzie team has advised the creditors' Steering Committee of BTA Bank, one of the CIS region's largest banks, on one of the world's largest and most innovative restructurings of bank debt.
On 31 August 2010, the Special Financial Court of Almaty recognised the restructuring of the bank debt of JSC BTA Bank, the terms of which were approved by 92% of creditors at the end of May and the implementation of which was only completed on 25 August. Unless appealed, the decision should enter into legal effect within 15 days of that date.
Approximately US$16.7 billion worth of debt of BTA Bank, which was formerly the largest bank in Kazakhstan, was restructured through different packages offered to creditors resulting in the debt burden of BTA Bank being reduced to about US$4.2 billion. The restructured debt included bilateral and syndicated loans, structured finance securities, bonds, ECA-covered transactions, derivative transactions and trade finance. This is the largest ever restructuring of a financial institution in the CIS.
The restructuring has not only been highly significant as a result of its volume and complexity, but also in that a consensual restructuring of the financial indebtedness of BTA Bank was achieved without the need to resort to a full government bailout or a good bank/bad bank structure. This is quite unusual, particularly in relation to a restructuring of this magnitude.
The restructuring of BTA Bank steered a new middle course, with the cost of restructuring being borne by both private sector creditors and Samruk-Kazyna, the Kazakh sovereign wealth fund, which took over the bank in February 2009.
BTA Bank remained fully operational throughout the restructuring. Unusually, the creditors' Steering Committee included different classes of creditors. It is thought that the restructuring and the composition of the Steering Committee may serve as a blueprint for restructuring the debt of other distressed banks in the future.
Baker & McKenzie Head of the European Banking & Finance Practice, Michael Foundethakis, who co-led on this transaction with London partner Ian Jack and Almaty Partner Curtis Masters, said: "We experienced quite a unique situation whereby the creditors' Steering Committee was comprised of more than one class of creditors. Although at times there were conflicts amongst the interests of commercial lenders as against those of bondholders as against those of export credit agencies as against those of trade finance lenders, by having all classes of creditors at the same negotiating table, the creditors were able with greater transparency to structure a very balanced, diverse and reasonable restructuring package within a very tight timeline."
The Baker & McKenzie team comprised London Banking & Finance Partner Ian Jack, Munich Banking & Finance Partner Michael Foundethakis, London Banking & Finance Senior Associate Gabrielle White, London Capital Markets Partner Roy Pearce, Almaty Banking & Finance Partner Curtis Masters, Moscow Banking & Finance Partner Mikhail Turetsky and numerous Associates from London, Munich, Almaty, Moscow, Amsterdam, New York and Singapore.
Baker & McKenzie negotiated the terms of the financial restructuring on behalf of a combined Steering Committee of different classes of international creditors. The Steering Committee comprised 11 banks including, The Royal Bank of Scotland N.V., Commerzbank Aktiengesellschaft, D. E. Shaw Oculus International, Inc., Euler Hermes Kreditversicherungs AG, Fortis Investment Management UK Limited, Gramercy Advisors LLC, Bank of Singapore Limited, KfW (representing its affiliates DEG - Deutsche Investitions- und Entwicklungsgesellschaft mbH and KfW IPEX-Bank), Standard Chartered Bank, Export-Import Bank of the United States and Wells Fargo Bank, N.A. (formerly Wachovia Bank N.A.).
Baker & McKenzie has acted on a number of bank debt restructurings in recent months in the Ukraine, Austria, the Netherlands, Russia and Iceland. The practice is particularly strong across the CIS where Baker & McKenzie has advised on most distressed bank situations during the latest financial turmoil and also during previous cycles in 2004 and 1998.
In July Michael Foundethakis also led a team acting for eleven export credit agencies and other multilateral creditors, on the restructuring of the ECA-covered debt of Open Joint Stock Commercial Bank Nadra, one of the largest commercial banks in the Ukraine. The team then advised the trade finance creditors in the restructuring of their loans to Bank Nadra.
In addition, Michael Foundethakis and Kiev Banking & Finance Partner Serhiy Chorny jointly led the team that advised earlier this year the Steering Committee of creditors in the US$237 million successful restructuring of the international debt of First Ukrainian International Bank (FUIB). This was the first successful restructuring of the international debt portfolio of a Ukrainian bank.
About Baker & McKenzie
Founded in 1949, Baker & McKenzie advises many of the world’s most dynamic and successful business organizations through more than 3,750 locally qualified lawyers and over 5,700 professional staff in 67 offices in 39 countries. Baker & McKenzie is known for having a deep understanding of the language and culture of business, an uncompromising commitment to excellence, and world-class fluency in its client service.
Baker & McKenzie’s global revenues for the fiscal year ended June 30, 2010, were US$2.104 billion. John Conroy is Chairman of the Firm’s Executive Committee. (www.bakermckenzie.com)