Photographer: Xaume Olleros/Bloomberg
markets

Chad Signs Deal With Glencore After Review of $1 Billion Debt

  • African nation receives grace period, pays lower interest rate
  • Glencore to guarantee oil supply for domestic refining

Chad signed a deal with Glencore Plc to restructure more than $1 billion in debt in an agreement that will help the African nation to avoid a financial crunch.

The review was signed on Wednesday and is a “good outcome” for Chad, Guillaume Foucault, a spokesman for the country’s national oil company, said by phone from Paris. Under the terms of the agreement, the loan’s maturity is extended to 12 years while Chad will receive a grace period of two years, said Foucault.

The rate on the loan is also reduced to the benchmark Libor interest rate plus 2 percent, from Libor plus 7.5 percent, while Glencore will guarantee the supply of oil for Chad’s domestic refining requirements for the duration of the contract, he said.

Read more on Glencore, Chad’s talks to resolve the debt deal

Glencore and its banks agreed in late 2015 to restructure two oil-for-cash loans with Chad, dating from 2013 and 2014, extending the repayment to seven years from an initial four years. Glencore initially lent the African country $600 million in 2013 through a so-called pre-payment export deal, in which a nation receives an advance on its oil sales and repays the debt by allocating crude cargoes to its creditors.

Chad has few sources of foreign exchange other than oil and is one of the most underdeveloped countries in the world, ranking 186th out of 188 in the United Nations Human Development Index. Out of $271 million in oil-sales revenue in 2016, debt-service costs paid to Glencore was $231 million, which left only $40 million to the treasury, according to the International Monetary Fund.

The lender, which approved a $312 million bailout for the nation in June, supports the agreement reached with Glencore, said Foucault.

Glencore is pleased to have reached the deal and looks forward to working “together across all aspects of our oil business,” Alex Beard, global head of oil, said by email.

Peter Grauer, the chairman of Bloomberg LP, is a senior independent non-executive director at Glencore.

— With assistance by Javier Blas

    Before it's here, it's on the Bloomberg Terminal. LEARN MORE