Bonds of 22 companies held by Single Pension Fund of Kazakhstan depreciate four-fold

The portfolio of Kazakhstan’s Single Pension Fund contains bonds of 22 companies that have defaulted on their payments, Tengrinews reports citing the National Bank of Kazakhstan.

There 22 billion such bonds and their nominal value is 110.35 billion tenge ($600 million).

"The total present value of these bonds determined by an independent appraiser is 29 billion tenge ($142 million). The Single Pension Fund will perform the necessary work in relation to these issuers," the press service of the Bank said.

One of the 22 unprofitable companies is notorious Kazakhstan Kagazy. The total nominal value of this company's bonds held by the Fund is 12.7 billion tenge ($39.4 million).

Originally, these bonds were bought by Astana, Oil & Gas-Dem, Ular Umit, GNPF, Grantum, Otan and Capital pension fonds. Later, after the unification of all the Kazakh pension funds, the bonds ended up with the Single Pension Fund.

These bonds constitute only a small part of the pension savings accumulated in the Fund that held 24 billion dollars as of December 1, 2014 according to its website. But the depreciation is unpleasant nevertheless, especially since Kazakhstan Kagazy did not just default on its securities. It turned out the bonuses of the company’s senior management did not quite add up to its obligations. 

Recently it was disclosed that Kazakhstan Kagazy paid about 7.9 million dollars to one of its shareholders and his relative. In addition, despite the losses, leadership of Kazakhstan Kagazy and several firms affiliated with the senior management were paid generous compensations amounting to as much as $2.3 million. The company has been in the spotlight of Kazakh and European regulators for a while already and there are several lawsuits against it in several countries. This makes revaluation of its securities in the foreseeable future highly unlikely.  

And aggravating the situation further, the Fund is unlikely to ever get rid of the bonds even at the quarter of its nominal value. "The National Bank is unable to sell these bonds. The sale will be considered in case a proposal to purchase is submitted or if there is a demand for them at the market," the National Bank said.

Reporting by Alisher Akhmetov, writing by Dinara Urazova, editing by Tatyana Kuzmina