By Sara Israfilbayova
A voluntary restructuring of external obligations of the International Bank of Azerbaijan (IBA) is the most optimal way of settling issues related to the bank's debt to foreign creditors, said Deputy Economy Minister Sahil Babayev during the EU-Azerbaijan Business Forum on June 8.
Answering the question why the state, which has free foreign exchange reserves and is able to repay debts in full, decided to go on restructuring the IBA's external obligations, thereby creating risks for the country's credit and investment ratings, Babayev noted that the use of the country's reserves is the last option, to which Azerbaijan can resort.
"Azerbaijan is working on the most optimal ways. As a result of restructuring the external liabilities of the IBA, Azerbaijan will get favorable conditions for itself," the deputy minister said.
The IBA has recently commenced a process of voluntary restructuring within the framework of its financial improvement.
The restructuring plan contemplates a restructuring process to be effected through an exchange of IBA’s senior and junior foreign currency obligations for direct sovereign obligations of Azerbaijan.
Before the transfer of debts to the government is completed, the implementation of foreign creditors' foreign currency liabilities (with the exception of payment of interest on transactions for trade financing) is suspended.
The total amount of these commitments is $ 3.3 billion. Among the major foreign creditors of the IBA are the American company Cargill, Citibank, Rubrika Finance Company Limited, Credit Suisse AG.
The IBA appealed to New York and London Courts. Both courts made a positive decision regarding the IBA to prevent lawsuits from foreign creditors regarding the bank's assets.
In July 2015, President Ilham Aliyev signed a decree on the measures for rehabilitation related to the preparations for privatizing the state-owned shares of the International Bank of Azerbaijan JSC.
The shortcomings in the management, investment and loan policy of the IBA, as well as financing of less efficient, risky investment projects worsened the Bank's financial state, caused increase in the share of distressed assets and reduced its liquidity.
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