The International Bank of Azerbaijan (IBA) told APA news agency on June 6 that a London court had supported its debt restructuring plan by upholding its request to prevent creditors from pursuing legal action against it in the UK.

State-owned IBA, Azerbaijan's largest lender, defaulted on $3.33bn worth of foreign obligations on May 11 and proceeded to present a debt restructuring plan on May 23 that involved swapping its obligations for sovereign ones with a longer maturity, lower yields and, for some creditors, a reduction in the principal of up to 50%.

Among IBA's creditors are the trade finance arm of American food giant Cargill, which is owed $714mn, and the holders of IBA's $500mn eurobond. Some of the creditors have reportedly addressed letters of complaint to Azerbaijani President Ilham Aliyev, decrying the lack of state support for the public bank's borrowing.

The struggling bank's default came as a shock because it was rescued by the state in 2015 and was being recapitalised and cleaned up prior to a planned reprivatisation. 

IBA does not have any direct creditors in the UK, although a host of large banks from Italy (Banco Popolare, Intesa Sanpaolo), Germany (Landesbank Berlin), the Netherlands (Rabobank), France (Societe Generale) and Switzerland (Credit Suisse) are among its creditors.

Ireland's Rubrika Finance, which is owed $100mn, is the creditor that will be the worst affected because it gave IBA a less senior form of loan, and is set to find itself in a position where it will have to accept a 50% reduction in the principal.