By Sujata Rao and Karin Strohecker

LONDON, May 23 (Reuters) - Azerbaijan infuriated state-run bank IBA's creditors on Tuesday by saying that while they could swap its debt for sovereign bonds, some would suffer losses and have to wait longer.

Azeri Finance Minister Samir Sharifov told debt holders they would receive significant "credit enhancement" by getting higher-rated sovereign paper, which would raise the government's debt-to-GDP by $2.34 billion to 27 percent of GDP.

The International Bank of Azerbaijan suspended payments on some liabilities and said last week it was seeking support to restructure more than $3 billion of debt.

The bank got into problems in 2015 and Azeri President Ilham Aliyev followed International Monetary Fund advice, ordering that its balance sheet be cleaned up and the bank sold off. "We are offering you sovereign debt which is much better than keeping debt of IBA, even though this option is also available. We are here to support the bank, we believe this is a reasonable and mutually beneficial option for the bank and creditors," Sharifov told investors at the offices of law firm White & Case.

IBA's creditors include commodities trader Cargill CARG.UL , Italian lender Intesa Sanpaolo ISP.MI , Germany's Commerzbank CBKG.DE and Bayerische Landesbank BLGGgi.F and French bank Societe Generale SOGN.PA . It also has a $500 million Eurobond due in 2019 AZ107643621= .

The bank's dollar bond maturing in 2019 fell by more than 2 cents after meeting, with some angry bondholders saying the restructuring and losses being imposed on them would destroy Azerbaijan's reputation with creditors.

Others said better terms had been offered to trade finance creditors, adding that Azerbaijan's oil wealth and low debt ratios should allow the country to improve restructuring terms.

"Is it worth it to destroy your willingness-to-pay reputation As creditors we will remember that," one investor (NAME) asked the Azeri minister.

Eric Lalo, managing director at Lazard which is advising IBA, said trade finance instruments could be exchanged for sovereign paper at par, repayable over four years and amortising annually. This amounts to $861.5 million.

Senior creditors, including Eurobond holders, who are the biggest category with $2.4 billion, have three options, he said.

The first involves swapping into sovereign bonds with a 12-year maturity but amortising in three annual instalments in years 10, 11 and 12. These would carry a 5-1/8 percent rate and with an "enhancement value" - or haircut - priced at 20 cents in the dollar.

The presentation said every $1 in the principal of IBA debt would be exchanged for $0.8 of sovereign bonds with a minimum $500 million to be issued.

The second option involved a one-on-one swap into 15-year 3.5 percent sovereign bonds, while the third option is to stay with IBA, with bonds exchanged at par for a 7-year 3.5 percent issue, Lalo said.

Holders of subordinated debt worth $100 million are asked to swap every $1 into $0.5 of sovereign debt, Lalo said.

The new instruments will be under English law, said Ian Clark, partner at White & Case which is also advising IBA.

IBA is hoping to wrap up the process, which some investors said was too complex, by the end of August, with two-thirds support needed from creditors at a July 13 vote.

The proposals will easily be approved because Azeri sovereign wealth fund SOFAZ holds $1 billion of the debt.

However, Pavel Mamai, a portfolio manager at UK hedge fund Promeritum, said: "(Terms) are on the lower side of expected, and I think they would need to improve to get it over the line."

Sharifov said there was no room for change.

"This is the offer that's on the table, we are ready to support, nothing more than that." (Editing by Alexander Smith) ((sujata.rao@thomsonreuters.com; 44 20 7542 6176 ; Reuters Messaging: sujata.rao.thomsonreuters.com@thomsonreuters.net))