Talks between Chad, Glencore Plc and a group of banks to restructure more than $1 billion in debt have stalled after the African nation rejected the commodities trader’s latest proposal to delay repayment of an oil-for-cash loan, according to people familiar with the negotiations.
The negotiations reached a stalemate after five months of on-and-off talks, with both sides rejecting the other’s offers and counter offers, said the people, who asked not to be identified because the discussions are private.
Chad needs a deal — a second restructuring of its oil debt in less than two years — to avoid a looming financial crunch, as it diverts more oil shipments to repay the debt. The country is in “debt distress” and the borrowings would be unsustainable without restructuring, the International Monetary Fund said in August.
The nation has kept up to date with its obligations so far, but the risk of a default is increasing, the people said.
The talks pit the world’s largest commodities trader, with co-lenders including Citigroup Inc., Deutsche Bank AG, Natixis SA and Societe Generale SA, against one of the world’s poorest nations. The stalemate highlights the risk that the Glencore-led syndicate took lending the landlocked African country the equivalent of almost 15 percent of its GDP to be repaid via future crude oil cargoes.
Chad, with few sources of foreign exchange other than oil, is one of the most underdeveloped countries in the world, ranking 186th out of 188 in the United Nations Human Development Index.
Glencore earlier this month proposed a plan that would allow the country to delay full repayment to eight years from five currently and offered a grace period on the principal in 2018, together with easier payment terms in 2019, the people said. However, Chad had asked for a longer grace period and maturity and rejected the proposal.
Glencore reiterated its offer in a letter dated Nov. 14, but the African country doesn’t plan to accept it. Further “unfair clauses in this toxic contract” needed to be reviewed, said Guillaume Foucault, a spokesman for Chad’s national oil company, which is part of the negotiations. Among other changes, Chad is seeking a further cut in the reduced interest rate that has been offered by Glencore and its partners, Foucault said.
Glencore declined to comment.
