Denis Sassou Nguesso. Picture: REUTERS/ANIS MILI
Denis Sassou Nguesso. Picture: REUTERS/ANIS MILI

London — Talks to salvage a tentative $1.7bn debt restructuring between Congo Republic and energy traders Glencore and Trafigura are stuck, sources said, jeopardising an IMF bailout for the debt-hobbled nation.

In July, the IMF signed off on a $449m, three-year lending programme to help the central African nation’s ailing economy — but only $45m has been disbursed, with other funds subject to semi-annual reviews.

Those hinge on restructuring oil-backed loans to Swiss traders as money the state saves on reduced debt servicing that would fill a gap in an overall $2bn national rescue plan. More IMF disbursements could help unlock another nearly $900m in financing from the World Bank, African Development Bank and France, all of whom are backing the rescue programme.

But the IMF said it has held off on submitting a 2019 year-end review to its executive board as it waits for Congo to finalise a deal with the traders. An IMF spokesperson said Congolese authorities had indicated to the institution that they expect restructuring negotiations with the oil traders to be done this quarter.

However, two banking and commodities industry sources familiar with the talks said an agreement in principle reached over the summer had fallen apart, with both sides entrenched in their positions despite ongoing sporadic contact.

Congo wants a partial capital writedown and is meanwhile refusing to allocate cargoes to repay debt, the sources said, while the companies are considering legal action. A Congo government spokesperson did not respond to requests for say, while spokespeople for Trafigura and Glencore declined to say.

An IMF spokesperson said: “We have not received any formal communication from the authorities regarding the specifics of an agreement in principle, either in the past or more recently.”

Financial adviser Lazard, which is working on behalf of Congo, would not say on the negotiations. Another adviser, Parnasse, was not immediately reachable.

Improving output 

Congo’s cash-strapped energy industry has been boosted by major recent finds from Italy’s ENI and France’s Total, raising output to about 350,000 barrels a day.

The former French colony, ruled by President Denis Sassou Nguesso for all but five years because 1979, is expected to be the third-largest oil producer in sub-Saharan Africa by 2021. Court action was being discussed among the traders, the sources said, as Glencore has not been allocated an oil cargo because 2018 while Trafigura has only been receiving sporadic ones.

Congo restructured nearly $1.6bn in loans from China without taking a haircut, according to a deal inked in 2019, before the IMF agreement. That deal plus an increase in oil prices had strengthened the Swiss companies’ resolve, according to one source familiar with their position.

“They need a restructuring and apparently the Chinese deal was done without haircut, so why would we accept a haircut at $65 a barrel?” the source said. Led by banks, Glencore initially lent about $850m to Congo in 2015 to be repaid with crude over five years.

Meanwhile, Congo is in default on Trafigura’s loan as the original timeline has already lapsed. The trader lent about $1bn in 2014 with a maturity in 2019. Unlike Glencore, Trafigura is fully responsible for the debt, though it has insured it with reinsurers. The total remaining debt to both traders and banks is nearly $1.7bn, according to sources with knowledge of the negotiations. Congo has not confirmed the figure.

“One possibility is that Congo has reassessed the necessity of the (rescue) programme, given higher oil prices and production, as well as the need to spend more freely ahead of elections next year,” another banking source familiar with the matter said. Congo is still far off top African producers such as Nigeria, where output is about 2-million barrels a day.

But a sustained rebound could help relaunch hospitals and water and power lines in one of the world’s poorest countries.

Reuters

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