Azerbaijan’s greatest bank suspends some debt payments

By Nailia Bagirova| BAKU

BAKU Azerbaijan’s biggest lending institution, International Bank of Azerbaijan (IBA) stated on Thursday it had actually suspended payments on a few of its liabilities and asked its foreign financial institutions for assistance while it reorganizes its bad loans.The statement was the most remarkable sign to this day that a financial downturn rumbling in energy producer Azerbaijan considering that costs for oil and gas slumped 3 years back is now threatening the health of its banking sector.Azerbaijan’s financial resources appeared to have actually supported this year after the federal government

cut budget costs, and oil rates enhanced, however economic experts had actually warned of a remaining danger from bad financial obligation on the balance sheets of Azerbaijan’s banks.The state-controlled bank said in a declaration that it had suspended payments of principal and interest on

the liabilities that will be included in its restructuring, though it did not define what they were.In New york city, the bank submitted a petition under Chapter 15 of the United States bankruptcy code. Such a petition is not a bankruptcy filing

but keeps creditors from pursuing legal actions in the United States, offering debtors time to reorganize their businesses.The bank stated it had actually missed out on a scheduled payment under a$ 100 million subordinated loan owed to Rubrika Finance Business Ltd., which is based in Dublin and operates as a debt providing vehicle.The bank said it was implementing a restructuring plan and had kept Lazard Frères as monetary adviser and White & Case LLP as legal consultant. It also stated it prepared to swap a few of

its liabilities for Azeri sovereign liabilities.IBA said it continued to conduct day-to-day organisation with its clients, including all transactions in & relation to private and corporate deposits. A Reuters reporter who visited several of the bank’s ATMs in the Azeri capital late on Thursday stated there were no lines. Samir Sharifov, Azerbaijan’s financing minister, interested the holders of IBA’s foreign currency commitments for help while the bank is restructured. He stated he planned to satisfy IBA’s investors in London on May 23. The IBA has a total of$ 908 million

in debt exceptional, according to Thomson Reuters data. That consists of$ 240 million in 2 loans and the rest in Eurobonds. One of the Eurobonds is denominated in Mexican pesos and grows in June 2022. FOREIGN FINANCIAL INSTITUTIONS “The Ministry of Finance has noted with issue the weakening monetary and capital position of International Bank of Azerbaijan,”Sharifov stated in a declaration.”The Ministry of Financing hopes and anticipates that holders of IBA’s foreign currency obligations will consent to support the suggested restructuring plan so regarding assist in the arrangement of additional support to IBA from the federal government.” IBA’s most instant foreign liability, the Thomson Reuters information show, is a June 11 voucher payment on a

$500 million Eurobond that grows in 2019. It was not clear from the information how big the repayment would be.The bank likewise has a$ 185 million loan that falls due on Oct. 26, 2017, according to the data, financial institutions for that include Commerzbank, a branch of Bayerische

Landesbank, a Russian system of Societe Generale, and Qatar’s Commercial Bank QSC.Azerbaijan’s federal government has already undertaken a rescue package for IBA. Azeri President Ilham Aliyev in 2015 purchased the finance ministry and central bank to move bad and risky loans from IBA to a state-owned credit company, Aqrarkredit.In December in 2015, the government took more action, injecting extra capital into IBA via a share issue, and thus increasing its stake in the bank to 76.73 percent.In a declaration released on Thursday, Khalid Ahadov, IBA’s chairman, stated he was enthusiastic the bank would be financially practical, but said: “IBA is in a difficult monetary position.”Dmitri Vasiliev, director of monetary organizations at credit ranking agency Fitch, said previously this year IBA would need more government assistance while it attempts to reconstruct its loan book.” We view IBA as stopped working institution today,”Vasiliev stated.(Additional reporting by Margarita Antidze in

TBILISI, Katya Golubkova in MOSCOW and Jonathan Stempel in New York City; Composing by Christian Lowe; Modifying by Katya Golubkova and Catherine Evans)