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IMF aid to Congo Republic on hold over Glencore, Trafigura impasse

Published 24/01/2020, 17:19
IMF aid to Congo Republic on hold over Glencore, Trafigura impasse
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* IMF bailout programme hangs in the balance

* Congo pushing for haircut on oil-backed loans

* Congo in default with Trafigura

* Glencore has not received an oil cargo since 2018

By Julia Payne, Dmitry Zhdannikov and Joe Bavier

LONDON/JOHANNESBURG, Jan 24 (Reuters) - Talks to salvage a

tentative $1.7 billion debt restructuring between Congo Republic

and energy traders Glencore GLEN.L and Trafigura TRAFGF.UL

are stuck, sources said, jeopardising an International Monetary

Fund bailout for the debt-hobbled nation.

The IMF signed off in July on a $449 million, three-year

lending programme to help the central African nation's ailing

economy - but only $45 million has been disbursed with other

funds subject to semi-annual reviews.

Those hinge on restructuring the oil-backed loans to the

Swiss traders as money the state saves on reduced debt servicing

would fill a gap in an overall $2 billion national rescue plan.

More IMF disbursements could help unlock another nearly $900

million in financing from the World Bank, African Development

Bank and France who are all 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 spokesman 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 told Reuters 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 spokesman did not respond to requests for

comment, while spokespeople for Trafigura and Glencore declined

to comment.

An IMF spokesman 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 advisor Lazard, which is working on behalf of

Congo, would not comment on the negotiations.

Another advisor, Parnasse, was not immediately reachable.

IMPROVING OUTPUT

Congo's cash-strapped energy industry has been boosted by

major recent finds from Italy's ENI ENI.MI and France's Total

TOTF.PA , raising output to about 350,000 barrels per day.

The former French colony, ruled by President Denis Sassou

Nguesso for all but five years since 1979, is expected to be the

third largest oil producer in sub-Saharan Africa by next year.

Court action was being discussed among the traders, the

sources said, as Glencore has not been allocated an oil cargo

since 2018 while Trafigura has only been receiving sporadic

ones.

Congo restructured nearly $1.6 billion in loans from China

without taking a haircut, according to a deal inked last year,

prior to 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 $850 million 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 around $1

billion in 2014 with a maturity in 2019.

Unlike Glencore, Trafigura is fully responsible for the

debt, although it has insured it with re-insurers.

The total remaining debt to both traders and banks is nearly

$1.7 billion, according to sources with knowledge of the

negotiations. Congo has not confirmed the figure.

"One possibility is that Congo has re-assessed 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 a way off top African producers like Nigeria,

where output is around 2 million bpd. But a sustained rebound

could help re-launch hospitals and water and power lines in one

of the world's poorest countries.

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