Rep. of Congo, Trafigura reach agreement on restructuring of oil loans

The Republic of Congo and commodities-trading house Trafigura Group agreed to reorganize several hundred millions of dollars in oil-for-cash loans that the African nation struggled with after crude prices fell, according to people familiar with the talks.

The restructuring, which also involves several banks that supported the Trafigura deal, is key for Congo as it will help to unlock financial help from the International Monetary Fund. 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 channeled via state oil company Societe National des Petroles du Congo, or SNPC.

Congo’s eurobonds, which have rallied since a separate restructuring deal with China, rose again on Wednesday. The yield on Congo’s dollar bond due in 2029 fell almost 10 basis points on Wednesday to 9.338%, according to data compiled by Bloomberg.

Trafigura, rival Glencore Plc and local trader Orion Oil Ltd.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 people said.

Lending Risks

Trafigura declined to comment, while Republic of Congo government spokesman Thierry Moungalla said by phone from Brazzaville, the capital, that he “can’t make any comments on whether our government has or hasn’t signed any agreement with Trafigura.” Orion Oil founder Lucien Ebata didn’t immediately respond to a phone call and a text message seeking comment.

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

The Republic of Congo is still in talks with other oil traders. Glencore and a syndicate of banks are owed about $700 million by Congo from pre-export finance oil deals, according to the trading house’s 2018 annual report. Glencore couldn’t immediately comment.

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.

 

Source: Bloomberg

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