Moody’s might downgrade Bank of Azerbaijan

Moody's Investors Service said International Bank of Azerbaijan’s debt ratings, including the Caa3 foreign-currency senior debt rating, remain under review for downgrade.

Based on the terms of a proposed debt restructuring announced on May 23, which proposes several options to investors including a proposed exchange ratio of 0.8 in sovereign bonds against existing claims, Moody's estimates the loss to be at about 20%, which it said is consistent with the current Caa3 debt rating.

In Moody's view, given the significant weight of Azerbaijani government-related entities amongst the creditors, coupled with the threat of a liquidation of the bank should the proposal be rejected, there is little prospect for creditor losses to be less than the agency now assumes. However, the agency said there remains a possibility of higher losses, should the proposal fail and the authorities proceed to liquidate the bank.

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