Kazakhstan to probe bond acquisition

Kazakhstan’s central bank will investigate the acquisition by the state-managed pension fund of $250 million worth of bonds in the International Bank of Azerbaijan (IBA) after the lender announced it would not repay some of its debts in full.

The state-owned bank, Azerbaijan’s largest, has suspended payments on some liabilities and is seeking support from creditors to restructure more than $3 billion of debt.

Some debt holders voiced anger on Wednesday after a meeting with Azeri officials in London at which they were told some would have to suffer losses under the restructuring plan.

The bank ran into problems in 2015 when bad loans built up. Azeri President Ilham Aliyev, on International Monetary Fund advice, ordered its balance sheet be cleaned up and the bank sold off, but no sale has occurred. The government has already taken over $5 billion in bad loans from IBA. Kazakhstan is a close political ally of Azerbaijan. That Kazakh officials are now questioning the prudence of holding IBA liabilities is likely to add to the pressure on the Azeri state to implement the lender’s restructuring.

Kazakh central bank head Daniyar Akishev said central bank officials took a decision in October 2014 to acquire, via an offshore company and a closed subscription, IBA’s 10-year bonds with a coupon paying 8.25 percent annually.