Creditors of the International Bank of Azerbaijan (IBA) are taking steps to block the proposed plan for restructuring the bank’s 3.3 billion dollar debt, two anonymous members of the investor group told
The state-controlled IBA aroused the fury of creditors at a presentation in London on Tuesday, suggesting an exchange of debt in foreign currency for a combination of new government bonds and bonds of the IBA itself.
One option involves writing off 20 percent of the senior debt. The plan will become mandatory if it is approved by creditors, which account for two-thirds of the debt in monetary terms. Azerbaijan wants to complete the restructuring by August 24.
The IBA has declared bankruptcy after it failed to pay a $100 million subordinated loan on May 10.
Although the deterioration of the financial situation of the bank has been long well-known, the Ministry of Finance of Azerbaijan assured investors that the government of the third largest oil producer in the former Soviet Union will continue to support the bank, sources said.
Creditors also expressed concerns to the Minister of Finance of Azerbaijan Samir Sharifov when they met face to face with him at the presentation of the plan in London. Answering the question as to why the state suddenly refused to support the bank, he
that the IBA never extended a sovereign guarantee.
According to Sharifov, although the bank belongs to the state, this does not mean that the government takes responsibility for restructuring its debt. At the same time, he urged the creditors to support the proposed plan.
The letter on behalf of “a large number of experienced international financial institutions” states that if the claims of creditors are not taken into account in the restructuring plan of the bank, “the members of the group are ready to take action to protect their interests.”
On May 15, the IBA filed for bankruptcy in New York to get assistance in restructuring the bank’s $3.3 billion.