BAKU (Reuters) - Azerbaijan’s biggest lender, International Bank of Azerbaijan (IBA) said on Thursday it had suspended payments on some of its liabilities and asked its foreign creditors for support while it restructures its bad loans.

The announcement was the most dramatic sign to date that an economic slowdown rumbling in energy producer Azerbaijan since prices for oil and gas slumped three years ago is now threatening the health of its banking sector.

Azerbaijan’s finances appeared to have stabilized this year after the government cut budget spending, and oil prices strengthened, but economists had warned of a lingering risk from bad debt on the balance sheets of Azerbaijan’s banks.

The state-controlled bank said in a statement that it had suspended payments of principal and interest on the liabilities that will be included in its restructuring, though it did not specify what they were.

In New York, the bank filed a petition under Chapter 15 of the U.S. bankruptcy code. Such a petition is not a bankruptcy filing but keeps creditors from pursuing legal actions in the United States, giving debtors time to restructure their businesses.

The bank said it had missed a scheduled payment under a $100 million subordinated loan owed to Rubrika Finance Company Ltd., which is based in Dublin and operates as a debt issuing vehicle.

The bank said it was implementing a restructuring plan and had retained Lazard Frères as financial adviser and White & Case LLP as legal adviser. It also said it planned to swap some of its liabilities for Azeri sovereign liabilities.

IBA said it continued to conduct day-to-day business with its clients, including all transactions in relation to individual and corporate deposits. A Reuters reporter who visited several of the bank’s ATMs in the Azeri capital late on Thursday said there were no queues.

Samir Sharifov, Azerbaijan’s finance minister, appealed to the holders of IBA’s foreign currency obligations for help while the bank is restructured. He said he planned to meet IBA’s investors in London on May 23.

The IBA has a total of $908 million in debt outstanding, according to Thomson Reuters data. That includes $240 million in two loans and the rest in Eurobonds. One of the Eurobonds is denominated in Mexican pesos and matures in June 2022.

FOREIGN CREDITORS

“The Ministry of Finance has noted with concern the deteriorating financial and capital position of International Bank of Azerbaijan,” Sharifov said in a statement.

“The Ministry of Finance hopes and expects that holders of IBA’s foreign currency obligations will agree to support the proposed restructuring plan so as to facilitate the provision of additional support to IBA from the government.”

IBA’s most immediate foreign liability, the Thomson Reuters data show, is a June 11 coupon payment on a $500 million Eurobond that matures in 2019. It was not clear from the data how big the repayment would be.

The bank also has a $185 million loan that falls due on Oct. 26, 2017, according to the data, creditors for which include Commerzbank, a branch of Bayerische Landesbank, a Russian unit of Societe Generale, and Qatar’s Commercial Bank QSC.

Azerbaijan’s government has already undertaken a rescue package for IBA. Azeri President Ilham Aliyev in 2015 ordered the finance ministry and central bank to transfer bad and risky loans from IBA to a state-owned credit organization, Aqrarkredit.

In December last year, the government took further action, injecting additional capital into IBA via a share issue, and thereby increasing its stake in the bank to 76.73 percent.

In a statement released on Thursday, Khalid Ahadov, IBA’s chairman, said he was hopeful the bank would be financially viable, but said: “IBA is in a difficult financial position.”

Dmitri Vasiliev, director of financial institutions at credit rating agency Fitch, said earlier this year IBA would need more government help while it tries to rebuild its loan book.

“We view IBA as failed institution right now,” Vasiliev said.