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UPDATE 1-Russia's Sberbank settles debt dispute with Azeri bank IBA

(Adds Sberbank's comments)

BAKU, Nov 6 (Reuters) - Sberbank and the International Bank of Azerbaijan (IBA) have settled a dispute over funds owed to Russia's largest bank by IBA, an Azeri and Sberbank officials said on Wednesday.

In 2017, state-run IBA proposed a plan to restructure $3.3 billion of its debt and said in July it had received approval from creditors holding 93.9% of the debt involved.

As part of the restructuring, which was under Azeri law, IBA obtained a moratorium from a London court preventing creditors from taking action against it without court permission.

Sberbank, the sole lender of a $20 million facility to IBA, did not agree to the restructuring and argued its dealing with IBA was governed by English law. A British court of appeal backed Sberbank in December 2018.

The parties reached an agreement on June 14, 2019, Ibrahim Alishov, head of Azerbaijan's Chamber for supervision of financial markets, told Reuters.

"According to the terms of the settlement agreement, IBA paid Sberbank $20 million in exchange for securities issued in the name of Sberbank during the restructuring of IBA," Alishov said.

"Sberbank withdrew its lawsuit against IBA in a London court," he said, adding the Moscow arbitration court had lifted a freeze on IBA assets.

Sberbank confirmed it had signed an amicable agreement with IBA, adding that the whole debt had not been restructured.

"According to (the agreement), IBA, indeed, paid $20 million to Sberbank," Maxim Degtyarev, head of Sberbank's distressed assets department, said. (Reporting by Nailia Bagirova in Baku; Additional reporting by Tatiana Voronova in Moscow; Writing by Margarita Antidze; Editing by Alexander Smith and Mark Potter)