S&P downgrades Alliance Bank JSC, BTA Bank JSC and its financial subsidiaries

/Standard & Poor's, Frankfurt, March 26, 09, heading by KASE/ - Standard & Poor's Ratings Services said today it lowered its counterparty credit ratings on three banks and one mortgage company in the Republic of Kazakhstan (foreign currency BBB-/Negative/A-3, local currency BBB/Negative/A-3), namely BTA Bank J.S.C. (BTA) and BTA's subsidiaries Temirbank JSC and BTA Ipoteka Mortgage Co. (BTAI) to 'C/C' from 'CCC+/C' and Alliance Bank JSC (Alliance) to C/C' from 'B/B'. The counterparty credit ratings on these entities remain on CreditWatch with negative implications, where they were placed on March 20, 2009. "The rating actions reflect our view that there is now a very high probability that BTA and its subsidiaries and Alliance will undertake debt restructurings, and that they are now less likely to gain support from the Kazakh government to meet their respective debt obligations according to their terms," said Standard & Poor's credit analyst Annette Ess. We understand that the Kazakh government is not willing to provide support for the two banks to service their debt obligations on a timely basis, which, given the highly distressed financial condition of the banks, in our view increases the likelihood of a debt restructuring. Our long-term ratings on BTAI and Temirbank are constrained by our ratings on BTA. We understand that the state-owned Samruk Kazyna welfare fund's majority takeover of Alliance has still not been completed and is likely to take some time. We no longer include an additional notch above Alliance's stand-alone credit profile due to our view of the lower probability of government support. The rating actions also reflect our view of the continuing downward pressure on BTA and its subsidiaries and Alliance's stand-alone credit profiles due, among other things, to significant asset-quality deterioration, which in our view is depleting their capitalization. Continuing funding and liquidity challenges and the instability of deposits also influenced the rating actions. We believe these entities are affected by the current global liquidity crisis and a severe domestic economic slowdown, both of which continue to erode liquidity levels and asset quality. "We expect to resolve the CreditWatch placements on BTA, Alliance, Temirbank, and BTAI once we obtain information about a possible debt restructuring, evidence of inability to meet relevant debt obligations according to their terms, or about the implications of Samryk Kazyna's ownership for these entities' respective creditworthiness, strategies, and financial flexibility," said Ms. Ess. If debt restructuring is imminent or the institutions do not meet debt obligations according to their terms, our criteria generally require us to lower the ratings to 'D'. Barring any further deterioration in their operating environments, we may raise the ratings on these entities if either future government support or improvements in their own stand-alone credit profiles help them to avoid a debt restructuring and allow them to meet their obligations in a timely manner. Primary Credit Analyst: Annette Ess, CFA, Frankfurt, (49) 69 33 999 157; annette_ess@standardandpoors.com Secondary Credit Analysts: Ekaterina Trofimova, Paris, (33) 1 4420 6786; ekaterina_trofimova@standardandpoors.com Magar Kouyoumdjian, London, (44) 20 7176 7217; magar_kouyoumdjian@standardandpoors.com Additional Contact: Financial Institutions Ratings Europe; FIG_Europe@standardandpoors.com [2009-03-27]