OREANDA-NEWS. February 18, 2011. BMB Munai, Inc. (NYSE Amex: KAZ) (the "Company") announced that it has entered into a definitive purchase agreement to sell all of its interest in its wholly-owned operating subsidiary, Emir Oil LLP, to a subsidiary of MIE Holdings Corporation (HKEx: 1555).  The initial purchase price is USD 170 million, which is subject to various closing adjustments and the deposit of USD 36 million in escrow to be held for a period of twelve months following the closing for indemnification purposes. In connection with the purchase, all notes and sums owed by Emir Oil LLP to the Company will be transferred to the purchaser.  Upon consummation of the sale, the Company will use a portion of the proceeds to repay the Company's outstanding USD 60 million convertible senior notes.

The Company intends to make an initial cash distribution to stockholders in the estimated range of USD 1.04 to USD 1.10 per share upon the closing from the transaction proceeds, after giving effect to the estimated closing adjustments and escrow amount and the repayment of the convertible senior notes and after providing for the payment of or reserve for other anticipated liabilities and transaction costs.  The mid-point of the estimated initial distribution price range (USD 1.07) represents a premium of 19% over the prior 30-day average trading price of the Company's common stock.  The Company intends to make a second distribution to stockholders that could range up to approximately USD 0.30 per share following termination of the escrow, subject to the availability of funds to be released from the escrow, actual costs incurred and other factors.

The definitive purchase agreement was approved by the five independent directors of the Company, based upon the recommendation of an independent oversight committee of the board.  UBS Investment Bank advised the independent oversight committee in the transaction.

Closing Conditions and Stockholder Approval

The transaction is subject to certain conditions, including regulatory approvals and other customary closing conditions.  The transaction is also subject to approval by the stockholders of the Company and the stockholders of MIE Holdings.  The Company expects to complete the closing in the third quarter of calendar year 2011.

The transaction and certain aspects of the note restructuring (described below) must be approved by a majority of the holders of the Company's common stock.  The Company expects to hold a special meeting of stockholders and in connection therewith to mail a proxy statement to its stockholders that will provide additional information concerning the transaction, the definitive purchase agreement and the note restructuring. Certain principals of the Company, who collectively own approximately 24% of the Company's outstanding shares of common stock, have agreed to vote their shares in favor of the transaction at the stockholders' meeting.

Information Regarding SEC Filings

The Company will file with the U.S. Securities and Exchange Commission (SEC) a current report on Form 8-K, which will include the definitive purchase agreement. The proxy statement that the Company plans to file with the SEC and mail to stockholders will contain information about the Company, the proposed sale and note restructuring transactions and related matters. STOCKHOLDERS ARE URGED TO READ THE PROXY STATEMENT CAREFULLY WHEN IT IS AVAILABLE, AS IT WILL CONTAIN IMPORTANT INFORMATION THAT STOCKHOLDERS SHOULD CONSIDER BEFORE MAKING A DECISION ABOUT THE PROPOSED TRANSACTIONS. In addition to receiving the proxy statement from the Company by mail, stockholders will be able to obtain the proxy statement, as well as other filings containing information about the Company, without charge, from the SEC's website at www.sec.gov or, without charge, from the Company at its website at www.bmbmunai.com. This announcement is not a solicitation of a proxy.

The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with the proposed transactions.  Information concerning the Company's participants is set forth in the Company's annual report on Form 10-K for the year ended March 31, 2010, which was filed with the SEC on June 24, 2010.  Additional information regarding the interests of the Company's directors and executive officers in the solicitation of proxies in connection with the proposed transactions will be included in the proxy statement to be filed with the SEC. The Company's press releases and other information about the Company are available on the Company's website.

Note Restructuring

In connection with the definitive purchase agreement, the Company obtained a waiver with respect to the Company's execution of the purchase agreement from holders of the Company's outstanding USD 60 million convertible senior notes.  The closing of the purchase agreement, however, remains subject to approval by the noteholders.  As previously announced, the Company is restructuring the notes pursuant to which the terms of the notes will be amended to, among other things, (i) increase the coupon rate to 10.75%, (ii) require the Company to make a USD 1.0 million cash payment towards the principal balance of the notes, which will result in an adjusted principal amount of USD 61.4 million after giving effect to the restructuring, (iii) extend the maturity date to July 13, 2013, (iv) grant the noteholders a new put option, exercisable one year prior to the new maturity date, (v) reduce the conversion price of the notes to USD 2.00 per share, (vi) provide additional covenant restrictions by the Company, including a prohibition on paying dividends on shares of the Company's common stock and on the pledge or disposal of assets, (vii) provide for semi-annual principal amortization payments of 30% of the Company's excess cash flow, and (viii) allow the noteholders to appoint a member to the board of the directors of the Company and the board of directors or similar body of Emir Oil.  If the sale transaction is consummated, the Company expects to redeem the notes.

Certain aspects of the note restructuring will be subject to stockholder approval and may be subject to the regulatory approval of the Kazakhstan Ministry of Oil & Gas. If such regulatory approval is required and not obtained, the noteholders will have an additional put option. The Company and the noteholders continue to work toward definitive documents to restructure the notes upon the terms disclosed above and upon other additional terms.

About MIE

MIE Holdings and its subsidiaries is one of the leading independent upstream oil companies operating onshore in the People's Republic of China (PRC) as measured by gross production under production sharing contracts.  MIE Holdings operates the Daan, Moliqing and Miao 3 oilfields in the Songliao Basin, the PRC's most prolific oil-producing basin, under three separate production sharing contracts with PetroChina, the largest oil company in China.  In addition, MIE Holdings pursues other development and production opportunities in China, and exploration, development and production opportunities internationally, both independently and in partnership with other major and independent oil companies.

Cautionary Note Regarding Forward-Looking Statements

This release contains "forward-looking" statements regarding the Company's proposed sale of Emir Oil LLP, the anticipated cash distributions to stockholders, the amount of such distributions, the closing of the transaction and the timing thereof, the filing of various information with the SEC, and the restructuring of the notes and the terms thereof.  All such forward-looking statements are subject to uncertainty and changes in circumstances, and there is no assurance the sale transaction or the note restructuring will be consummated. Moreover, no forward-looking statements are guarantees of future results or performance and involve risks, assumptions and uncertainties that could cause actual events or results to differ materially from the events or results described in, or anticipated by, the forward-looking statements.  Factors that could materially affect such forward-looking statements include the failure of any one or more of the closing conditions to the sale transaction, termination of the definitive purchase agreement, and other economic, business and regulatory risks and factors identified in the Company's periodic reports filed with the SEC.  All forward-looking statements are made only as of the date of this release and the Company assumes no obligation to update forward-looking statements to reflect subsequent events or circumstances.  Readers should not place undue reliance on these forward-looking statements.