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Kazakhstan-Based Temirbank Upgraded To 'B/B' On Merger With Alliance Bank; Outlook Stable

December 17, 2014 | Cbonds

• Kazakhstan-based Alliance Bank's debt restructuring plan is final, approved by the court on Dec. 12, 2014, and has led to substantial reduction of the bank's indebtedness and restoration of its financial profile.
• Alliance Bank is planning to complete the merger with Temirbank and ForteBank by Jan. 31, 2015.
• Temirbank will become a wholly-owned, fully integrated, core subsidiary of Alliance Bank, and will cease to exist as a legal entity in 2015 upon incorporation in Alliance Bank.
• We are raising our long- and short-term counterparty credit ratings on Temirbank to 'B/B' from 'B-/C' and our Kazakhstan national scale ratings to 'kzBB' from 'kzBB-', bringing the ratings in line with the group credit profile of the combined Alliance Bank, according to our Group Rating Methodology.
• The stable outlook on Temirbank mirrors that on Alliance Bank.

MOSCOW (Standard & Poor's) Dec. 16, 2014--Standard & Poor's Ratings Services said today that it had raised its long- and short-term counterparty credit ratings on Kazakhstan-based Temirbank JSC to 'B/B' from 'B-/C'. The outlook is stable. At the same time, we raised our Kazakhstan national scale rating on Temirbank to 'kzBB' from 'kzBB-'.

The upgrade reflects the announcement that Alliance Bank JSC's debt restructuring plan, which includes a merger with Temirbank and ForteBank JSC, was approved by the court on Dec. 12, 2014. This plan leads to a substantial reduction of Alliance Bank's indebtedness and restoration of its solvency.

By Jan. 31, 2015, Alliance Bank's merger with Temirbank and ForteBank is expected to be complete. Temirbank will become a wholly-owned and fully integrated subsidiary of Alliance Bank.

We therefore will consider Temirbank as a "core" subsidiary of Alliance Bank. According to our Group Rating Methodology, "core" subsidiaries are rated at the level of the group credit profile, which we assess at 'b'. As we assess Temirbank's stand-alone credit profile at 'b-', the ratings benefit from one notch of uplift, as per our criteria.

Temirbank's core status within the combined Alliance Bank Group reflects our treatment of this combination as a merger rather than an acquisition by Alliance Bank of the other two banks. We expect that Temirbank and ForteBank will cease to exist as legal entities in early 2015. We expect the integration of the three banks to take place in 2015-2016, resulting in a common information technology platform, risk management systems, and policies.

The new bank will likely be rebranded as Forte Bank in 2015, as the reputation of the Alliance Bank and Temirbank brands have been tarnished by years of financial difficulties following debt restructurings.

The raising of the national scale rating to 'kzBB' from 'kzBB-' and the upgrade of the subordinated debt reflects solely those ratings' relationship to the long-term global scale rating.

The stable outlook on Temirbank reflects that on Alliance Bank, given Temirbank's "core" status.

The stable outlook on Alliance Bank reflects our view that, following the restructuring and merger with Temirbank and ForteBank, the new bank will maintain a stable competitive position in Kazakhstan's banking sector, supported by its restored capitalization and profitability.

We expect Temirbank to keep its "core" status within the Alliance Bank Group and that the ratings and outlook on Temirbank will therefore move in tandem with the group credit profile. After the court decision, we see only a marginal risk that the combination of the three banks and the full integration of Temirbank and ForteBank into Alliance Bank will not go through. But if this risk materializes, we would reassess our view of the group support Temirbank receives.

Company: Temirbank

Full company nameOpen Joint Stock Company "Temirbank"
Country of riskKazakhstan
IndustryBanks

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