Energy in Azerbaijan

[Azad]

Re: Energy in Azerbaijan

I am still confused whether Sofaz has liquidity issues or has divested their investment AND have a liquidity crisis.

I have the impression they have liquidity crisis. Their books are so cooked up that no one will ever know.
In short, they are in dire situation. Keeping my fingers cross for ONE more year of low oil prices.

If you are totally broke you cannot restructure but if you have assets against liabilities you need time to divest to meet obligations.

Agree!
The question, did they funnel all their Sofaz assets trough the US or just their useless national bank assets.

[Azad]

Re: Energy in Azerbaijan

"International Bank of Azerbaijan bond falls on Moody's downgrade

May 16 Dollar bonds issued by the International Bank of Azerbaijan fell on Tuesday after the Moody's agency downgraded its credit rating in light of the bank's debt restructuring.

Data from Tradeweb showed that the bank's $500 million bond maturing 2019 fell 1.5 cents to 83.95 cents, just shy of the low hit on May 11.

The bank, which is Azerbaijan's biggest lender, said on Friday it needed to restructure more than $3 billion of its debt to tackle bad loans left over from the slump in oil prices.

In response, on Monday Moody's downgraded the bank's foreign currency senior unsecured debt rating to Caa3, and placed all long-term ratings on review for a possible downgrade.

"Given the financial condition of the bank, we cannot rule out haircuts to principal," analysts at Exotix said in a note, referring to the possibility that investors would have to write down some of the debt.

The sovereign's 2024 issue was down a quarter of a cent whilst those of state oil firm SOCAR were unchanged."

http://www.reuters.com/article/emerging-azerbaijan-bonds-idUSL9N0VN01P

[Azad]

Re: Energy in Azerbaijan

"Azerbaijan’s risks are spiraling

As of mid-May, Azerbaijan’s risk score has fallen to 39.4 out of a possible 100 points in Euromoney’s country risk survey – a long-term slide that has seen the country lose almost nine points since 2010. This has pushed Azerbaijan below Gabon and Guatemala to 87th in the global rankings of 186 countries ..

The bank has halted foreign debt payments, effectively defaulting on a $100 million payment to Rubrika Finance and is in dire need of a $3.3 billion rescue.

Interconnected risks

The IBA failure also highlights the interconnected risks, as it is predominantly state-owned and closely linked to Socar, the state oil company, which is an important source of government revenue. The biggest share of its loan book involves corporate-sector liabilities.

The bank had been a prospect for privatization this year and its failure will seriously undermine confidence in the delayed programme, not least because of huge concerns about corruption, still rated as a prime risk by Euromoney survey experts.

Jahangir Hajiyev quit the IBA as chairman in 2015, citing health reasons and was convicted last year for fraud.

The financial sector problems overall are considerably larger with a non-performing loan ratio now believed to exceed 20%, and with 12 of the 32 smaller banks still operating assumed to be in financial difficulty for failing to meet a deadline for submitting financial reports to the regulator. "The transfer of some of the central bank’s functions to the Financial Market Supervisory Body, set up in 2016, has achieved some banking sector consolidation, but policymaking has become even more obscure," says Gevorgyan.

It is just one example. Others include the delayed response when devaluing the currency and even discussing financial support with multilateral lenders despite the $33 billion-worth of sovereign wealth fund assets, which further raises questions as to why the authorities would even let IBA default.

http://www.euromoney.com/Article/3718116/Azerbaijans-risks-are-spiralling.html

[Azad]

Re: Energy in Azerbaijan

They are not only falling apart at this point the vultures are visible in the sky descending. I gave them a year looks like they have few months.

“IBA’s $500 million of 2019 dollar bonds have tumbled to 83.78 cents on the dollar, losing almost 17 cents since the day before the restructuring was announced on May 11.
A scandal is meanwhile brewing in Kazakhstan over its pension fund’s dealings in Azerbaijan.
A jump in borrowing costs could deepen Azerbaijan’s economic woes at a time when the crude producer is looking to external markets to raise capital for expensive energy projects.
Borrowing costs of the State Oil Co. of the Azerbaijan Republic, known as Socar, also climbed on Thursday as Moody’s said the restructuring could hinder the oil company’s ability to access cash. A deterioration in its liquidity could delay investment projects that are strategically important to the Azeri government, the ratings agency said. (eat shet and die betches)

https://www.bloomberg.com/news/articles/2017-05-18/don-t-bet-on-calm-in-azeri-bonds-as-bank-default-risks-contagion

[Azad]

Re: Energy in Azerbaijan

... restructuring could hinder the oil company’s ability to access cash. A deterioration in its liquidity could delay investment projects that are strategically important to the Azeri government,

The funny part that even turkey can't come to their rescue to take over or refinance their gas pipeline.
Few months ago turkey signed with Russia a competing gas pipeline (way larger gas quantity import from Russia) that would kill the azeri gas pipeline. An azeri pipe dream?

[HyeSocialist]

Re: Energy in Azerbaijan

They are not only falling apart at this point the vultures are visible in the sky descending. I gave them a year looks like they have few months.

“IBA’s $500 million of 2019 dollar bonds have tumbled to 83.78 cents on the dollar, losing almost 17 cents since the day before the restructuring was announced on May 11.
A scandal is meanwhile brewing in Kazakhstan over its pension fund’s dealings in Azerbaijan.
A jump in borrowing costs could deepen Azerbaijan’s economic woes at a time when the crude producer is looking to external markets to raise capital for expensive energy projects.
Borrowing costs of the State Oil Co. of the Azerbaijan Republic, known as Socar, also climbed on Thursday as Moody’s said the restructuring could hinder the oil company’s ability to access cash. A deterioration in its liquidity could delay investment projects that are strategically important to the Azeri government, the ratings agency said. (eat shet and die betches)

https://www.bloomberg.com/news/artic...isks-contagion

An astute Armenian politician would use this opportunity to drive a wedge in Azeri-Kazakh Turkish "brotherhood." We can see clearly where this brotherhood is coming from. They're just soviet trash that has business deals with each other. Aliyev was probably helping Nazarbayev siphon / launder money.

Maybe we can swoop on in and show the Kazakhs that it is better to "invest" in Armenian solar / wind power than it is in Azeri pension funds? I mean, once they buy it for us, we'll just keep it. BAHAHA. Just kidding. We should be equitable partners because that's how you run winning businesses and build solid relationships.

[HyeSocialist]

Re: Energy in Azerbaijan

I find all this interesting and good news.

Doing some research on the internet things raise more questions than answers.

Most importantly are we confusing invested assets with cash in hand i.e. liquidity issues.

https://www.ft.com/content/b8a71de4-be99-11e4-8036-00144feab7de

This article from FT. states a claim that Sofaz has a pool of investments in real estate in London, Paris, Moscow, Seoul as well as investments in equities and Gold.

The value of these investments is 37 Billion.

The thing is when investments are acquired or disposed of they are usually announced.
There are global registers who also track such acquisitions and disposals.

Although this article is dated I am still confused whether Sofaz has liquidity issues or has divested their investment AND have a liquidity crisis.

The terms used for their NewYork bank was restructuring.
If you are totally broke you cannot restructure but if you have assets against liabilities you need time to divest to meet obligations.

Both scenarios are bad for Azerbaijan, however, one outcome requires more patience from us for the expected conclusion.

.

The oil money they had was a big problem for two reasons. One obvious, the other not so obvious. The obvious one was the armaments they have bought , which has tipped the favor of war to Azerbaijan (I know, I know, but on paper, this is what it looks like). The second one was, how their oil bought them POLITICAL power. This is why you are constantly seeing these ridiculous articles backing up Azeris. It would be stupid for the US or the UK to talk bad about the Azeris, they are major investors. But now as they divest, they really have nothing to provide UK or the USA. This is where we in the diaspora, as Americans and Brits, can serve a much stronger reason to be on our side. We in fact connect Armenia to the USA and UK in a way that Azeri oil money no longer can't and previously couldn't.

[HyeSocialist]

Re: Energy in Azerbaijan

Kazakhstan’s state-run single pension fund plowed $250 million into bonds sold by the International Bank of Azerbaijan, the nation’s biggest lender that defaulted last week and now wants to restructure $3.3 billion in debt. It bought the entire issue by IBA in a private placement via Emerald Capital Ltd. in October 2014, near the height of the crisis in the oil market that would soon engulf both ex-Soviet nations.

Another major Kazakh financial institution was already a creditor of the troubled Azeri bank. But the money owed to the state-owned Development Bank of Kazakhstan -- a $198 million bond also sold via a private placement in September 2013 -- was repaid in four installments in 2016, more than two years before it was due, according to data compiled by Bloomberg and a statement issued on the Cayman Islands Stock Exchange.

The pension fund, however, is now stuck. IBA will unveil the details of its proposal to investors at a presentation in London next Tuesday, with Moody’s Investors Services expecting the restructuring to result in losses for creditors of more than 20 percent. Some of its foreign-currency debts will be exchanged for sovereign obligations. The bank has declined to provide further details.

“This is a result of poor risk management,” said Damir Seisebayev, head of research at Private Asset Management JSC in Almaty. Buying IBA bonds in a private placement was “risky because when something goes wrong, it becomes difficult to sell the securities,” he said.

IBA’s $500 million of 2019 dollar bonds have tumbled to 83.78 cents on the dollar, losing almost 17 cents since the day before the restructuring was announced on May 11. The yield on the government’s dollar notes maturing in 2024 climbed 24 basis points this week to 4.62 percent.

A scandal is meanwhile brewing in Kazakhstan over its pension fund’s dealings in Azerbaijan. Two parliamentary factions, including a pro-business party, are calling for those responsible for the investment decisions to be held to account.

The unified pension fund, created in 2013, has about $22 billion in retirement savings, which are managed by the central bank. Its holdings include bonds of Kazkommertsbank, a top Kazakh lender that’s getting a 2.4 trillion-tenge ($7.6 billion) state bailout. The pension fund also has deposits held by Kazkommertsbank.

The pension fund referred all questions to the National Bank of Kazakhstan, whose spokesman declined to comment. IBA didn’t immediately reply to questions.

The Development Bank of Kazakhstan said it sought an earlier repayment after learning of plans to privatize IBA, and the Azeri lender agreed. The reason for the bond’s purchase was the high yield on the notes, the Azeri bank’s sufficiently high credit ratings at the time and its status as a state lender, according to an emailed statement from the Kazakh bank.

Four months after the pension fund’s bond purchase, the Azeri currency lost about a quarter of its value against the dollar in a devaluation by the central bank as oil prices fell by more than half, putting lenders’ balance sheets under strain and sparking an exodus from manat savings among depositors. The currency was devalued for a second time later in 2015.

The $250 million bond was included under IBA’s “designated financial indebtedness,” or money it wants to restructure, published last week. It lists Emerald as the affected creditor and the facility as a “private placement.” The notes have the third-longest maturity of all the credit IBA wants to overhaul.

Emerald, based in Ireland, is a special purpose entity set up for raising money by issuing notes or other obligations. According to a prospectus, it sold the amount in two tranches -- of $200 million and $50 million -- which were then placed on deposit with the International Bank of Azerbaijan.

Kazakhstan’s pension fund said that at the current exchange rate, as of May 1 it owned the equivalent of 78.6 billion tenge of IBA’s dollar bonds due in 2024, according to a report. Around the time it invested in the Azeri bank’s debt, Kazakhstan’s financial system was also in distress, with the central bank about to inject 250 billion tenge to support the nation’s largest lender at the time.

The Azeri government has spent 9.93 billion manat ($5.9 billion) on buying the bank’s toxic assets, while also placing more than $1.3 billion on deposit to provide liquidity. Under a presidential decree in 2015, the authorities shifted its bad and risky loans to a state-owned credit organization, Aqrarkredit.

Before the bonds were sold to the pension fund, IBA reported a negative liquidity gap of 875 million manat for the first half of 2014, which equaled more than $1 billion at the time. The shortfall widened from 871.7 million manat a year earlier. Its former chairman, Jahangir Haciyev, is serving a 15-year term in prison after being convicted for embezzlement and abuse of office in 2016. He’s denied the charges.

“The International Bank of Azerbaijan’s liquidity position was vulnerable in recent years,” said Dmitri Vasiliev, director at Fitch Ratings in Moscow. While it received a credit rating of only one to two levels below the sovereign “because of the high likelihood of support provided by the state, the bank’s financial state and results were also weak.”

https://www.bloomberg.com/politics/articles/2017-05-18/bank-default-leaves-pension-cash-in-vise-of-azeri-restructuring

---

I am curious now. Is part of these SOFAZ's "assets" the toxic assets bought by the Azeri government? Are they part of the Kazakh pension funds?

[HyeSocialist]

Re: Energy in Azerbaijan

http://uk.reuters.com/article/azerbaijan-iba-debt-idUKL8N1ID7QR

---

Their leadership is straight up going to set up a restructuring in such a way, that hyperinflation OR heavy national debt is inevitable. They're going to put this debt on their people. HOLY F*CK.

[Vrej1915]

Re: Energy in Azerbaijan

Debt-Troubled Azerbaijan Spending Big on Islamic Games, Formula 1 and Mariah Carey
May 18, 2017, by Giorgi Lomsadze

http://www.eurasianet.org/node/83646

Just as its largest, government-owned bank defaults on its liabilities, Azerbaijan is shelling out on grand, lavishly mounted sports events and international celebrities, with no end in sight.

The Islamic Solidarity Games, a ten-day, multi-sport competition fashioned as the Olympics of the Muslim world, kicked off in Baku on May 12. It was a glamorous opening, complete with singing, dancing, fireworks, horses, camels and donkeys. A day earlier, it transpired that the International Bank of Azerbaijan (IBA), kept on life support by the Azerbaijani government, could not meet payments on dollar-denominated debt.

The IBA, the nation’s largest lender, asked foreign creditors to accept its plan to restructure $3.3-billion in debt, and sought US court protection from creditors while it tries to work its way out of debt.

Earlier this year, the Azerbaijani government increased its stake in the struggling bank from roughly 82 percent to just over 91 percent, after the finance ministry paid 600 million manats ($353 million) to expand its own holding.

The bank’s proposed debt-restructuring plan appears to involve the state itself picking up its foreign-currency obligations.

That raises questions about other burdens the state is carrying. And how it’s spending its money.

2015 was the year when oil prices took a dive and the country’s hydrocarbons-based economy began to contract. From January through April this year, its GDP growth rate stood at a negative 1.2 percent.

Oil prices have rebounded slightly since 2015, but the country still struggles with a depreciated national currency, reduced state spending and bad debt.

These factors, though, have not affected President Ilham Aliyev ’s enthusiasm for Azerbaijan playing the generous host to international sports events.
Before the Islamic Games, there were the European Games and a Formula 1 race in between. All of them cost top manat to Azerbaijani taxpayers, who saw much of their savings wiped out by the 2015 collapse in the manat’s value.

The “Islamic Olympics” cost Azerbaijan $100 million; Formula 1 less than $150 million; and the “European Olympics” $600 million in 2015, according to Sports Minister Azad Rahimov.

So far, the return on investment appears to be calculated primarily in PR.

For past events, to help that along, Baku booked global celebrities like Lady Gaga, Pharrell Williams and Enrique Iglesias. Mariah Carey is set to headline the next, another Formula 1 race in Baku this June.

The cost for Carey’s performance has not been announced, but past media reports have put the estimated price tag for her appearances at around $3 million.

What Carey or Formula 1 can do to boost confidence in Azerbaijan’s banking sector is not clear.

Within Azerbaijan there is very little room left for voicing criticism of state-financed showbiz and sports arrangements, but many Azerbaijanis complain privately or in online forums about their government’s fixation on extravaganzas amidst an economic slump.

In one online debate about the expediency of such spending, users sarcastically suggested looking on the bright side: “But think of all the selfies, check-ins, hashtags, the glamor.”

None of this criticism is reflected in Azerbaijan’s mostly state-controlled or allied media. It opts instead to focus on the success of Azerbaijani athletes – as of now, 50 gold medals at the Islamic Games, and counting.