Economy Wealth Management

Congo, Trafigura to agree restructuring of oil loans

Bloomberg/Dhiraj Singh

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The restructuring, which also involves several banks that supported the Trafigura deal, is key for Congo as it will help to unlock financial support from the International Monetary Fund (IMF).

Thursday 16, May 2019

(Bloomberg) --The Republic of Congo and commodities-trading house Trafigura Group agreed to reorganise several hundred million of dollars in oil-for-cash loans that the African nation struggled with after crude prices fell.

Congo owes creditors more than $9 billion and earlier this month agreed to restructure debt owed to China.

The Congo-Trafigura deal, which still needs to be formally ratified, will extend the debt maturity to 10 years from an original five years, the people said, asking not to be identified because the information isn’t public.

The deal includes a clause for accelerated repayments if oil prices rise above a certain level. The oil-for-cash loans were channelled via state oil company Societe National des Petroles du Congo (SNPC).

Trafigura, rival Glencore and local trader Orion lent Congo about $2 billion between 2015 and 2016 using so-called pre-export finance deals, in which traders advance cash in return for future oil cargoes. Trafigura accounted for less than half of the $2 billion debt.

The proposed rescheduling highlights the risk the commodities traders and the banks took in Congo, lending to the country at a time when its debt had already surged.

The firms have become lenders of last resort to poor but commodity-rich nations such as Congo, Chad and the region of Kurdistan in northern Iraq that traditional creditors consider too risky.

Additionally, in some cases the deals have soured, Glencore was forced to restructure more than $1 billion in loans to Chad twice in 2015 and 2018 after oil prices fell.

Congo is still in talks with other oil traders and Glencore as well as a syndicate of banks are owed about $700 million by Congo from pre-export finance oil deals.

The IMF earlier this month said the agreement between Congo and China to restructure bilateral debt was a decisive step to restore debt sustainability.

The government in Brazzaville agreed with the IMF to publish in the near-term the pre-financing contracts concluded by the national oil company (SNPC) with the trading houses.

 

TAGS : Trafigura Group, Congo, IMF, Loan restructuring , Glencore, Orion, Societe National des Petroles du Congo

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