London, November 6, 2001—IFC has helped
Bank TuranAlem (BTA), one of the leading private sector commercial banks
of Kazakhstan, to raise US$29 million by a structured equity issue. This
is the first international equity offering from Kazakhstan and the entire
Central Asia region since the Russian financial crisis of 1998 and the
first ever structured tier II capital issue from the region.
The new issue will boost BTA’s capital adequacy, diversify its investor
base and give it access to the international capital markets. The
issue consists of Convertible Preference Shares (CPS) which have been confirmed
by Ernst and Young as equity capital in accordance with International Accounting
Standards as well as the BIS rules. This first structured tier-II
equity from the Central Asia region provides a blueprint for future issues
by local banks and financial institutions. The issue has been classified
as primary capital by National Bank of Kazakhstan (Kazakhstan’s central
bank) due to the equity features of the instrument.
The structure of the CPS, which was developed by IFC, has served to bridge
the gap between the expectations of international institutional investors
and the risk profile of an emerging markets issuer. It incorporates
several features that mitigate risks associated with frontier markets and
the ability to realize upside potential. Such features contain protection
against currency risks by US dollar-linked indexation and several exit
options that are typically seen in private equity transactions. The
presence of an investor with a long-term strategic interest in BTA could
also have favorable valuation and liquidity impacts. The CPS will
be also listed on the stock exchange within 3 years.
In addition to strengthening its financial management, BTA is taking measures
to significantly improve corporate governance and minority right protections
consistent with best practices. It has opened its Board of Directors
to include representatives of its new foreign shareholders as non-executive
directors, who will have an important voice in critical Board decisions.
“The corporate governance measures being taken by BTA will help to raise
the standards of transparency, corporate reporting and performance in the
Kazakh banking sector to a level consistent with international practices,”
said Mr. Yerzhan Tatishev, Chairman of BTA.
Due to the success of the issue, BTA increased the size of the CPS issue
from $20 million to $29 million, representing approximately 25 per cent
of the Bank’s increased capital. The issue has been subscribed by
Raiffeisen Zentralbank Oesterreich AG (RZB) taking approx. 40% of the offering,
International Finance Corporation (IFC), European Bank for Reconstruction
and Development (EBRD), Deutsche Investitions-und Entwicklungsgesellschaft
mbH (DEG), and Nederlandse Financierings-Maatschappij Voor Ontwikkelingslanden
RZB is the head institution of the Austrian Raiffeisen Banking Group, the
second largest banking group in Austria. RZB has a long term strategy
for CEE, where it runs 13 banks with a comprehensive regional network of
more than 400 banking outlets and over 300 further business locations of
its specialized subsidiaries.
BTA was established in January 1997 by merger of two state-owned banks.
It was recapitalized and fully privatized in March 1998. BTA
is the second largest bank in Kazakhstan and specializes in both corporate
and retail banking. The bank has assets of approximately $845 million
and equity, $67 million and accounts for 18.3% of market share in Kazakhstan’s
banking assets as at August 31, 2001.
“The issue is a very positive signal of investor confidence at a difficult
time for emerging markets and the Central Asia region, in particular. This
equity issue will help BTA expand its business and provide a full complement
of financial services to the local corporate and retail sectors,” said
Khosrow Zamani, Director of IFC’s Southern Europe and Central Asia Department.
RZB’s Deputy Chairman, Herbert Stepic noted, “This transaction fits our
business strategy to support our clients with local expertise throughout
the entire region of Central and Eastern Europe (CEE) and CIS. We
value the collaboration with BTA and the international institutions who
are joining us in this transaction.”
IFC’s mission is to promote sustainable private sector investment in developing
countries, helping to reduce poverty and improve people’s lives. IFC
finances private sector investments in the developing world, mobilizes
capital in the international financial markets, and provides technical
assistance and advice to governments and businesses.
This press release does not constitute an offer of securities. Any
future offering of securities will not be registered with the US Securities
and Exchange Commission or any state regulatory authority and the securities
may not be offered or sold within the US or to, or for the account of,
US persons, absent such registration or an available exemption.