Saturday 23 November 2019

Irish bonds burned in Azeri bank's $3.3bn restructuring

Baku, capital of Azerbaijan
Baku, capital of Azerbaijan

Sean Duffy

Azerbaijan's largest bank, which defaulted last month on an Irish-issued bond, has reached an agreement with its creditors to restructure $3.3bn worth of debt.

The deal will see The International Bank of Azerbaijan's (IBA) creditors provided with government bonds as well as new bonds issued by the state-owned lender.

IBA made headlines last month when it defaulted on a bond issued through an Irish Special Purpose Vehicle.

Special Purpose Vehicles are used by companies and financial institutions to issue debt on the financial markets. IBA defaulted with $350m still outstanding on the Irish-issued bond.

Ireland has become an increasingly popular destination for Special Purpose Vehicles, with the foreign-owned entities often required to pay little or no tax here.

In the case of IBA, the company used two Irish SPVS - Rubrika Finance Co DAC and Emerald Capital DAC - in deals arranged by JP Morgan and Citigroup.

"The satisfactory outcome of IBA's restructuring demonstrates that the plan supported by the Ministry of Finance serves the long-term interests of the bank and of its creditors, who overwhelmingly approved it," said Azeri finance minister Samir Sharifov.

The success of the operation "will also facilitate the government of Azerbaijan's objective of privatising IBA by the end of 2018", Mr Sharifov added.

Creditors had previously objected to the terms proposed under a previous restructuring plan.

IBA's long-serving chairman, Jahangir Hajiyev, was sentenced to 15 years in prison in 2016 on charges of fraud and embezzlement.

Irish Independent

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