Glencore and four bank lenders have reached a deal with Chad on the restructuring of an oil-backed loan of more than $1 billion after months of often-fraught negotiations, the two parties said on Wednesday.
Glencore, backed by banks, lent the west African country’s state oil firm SHT (Societe des Hydrocarbures du Tchad) about $1.45 billion in 2014 to be repaid with crude oil cargoes.
The loan was restructured once in 2015 after the crash in global oil prices but the central African country still struggled to meet its own budget needs as the debt ate up nearly all of its oil profits – Chad’s main source of revenue.
Chad secured credit from the International Monetary Fund in June last year but the release of most of these funds depended on a second restructuring of this debt, which the IMF considered unsustainable. Chad then hired Rothschild & Co as its adviser.
“We are pleased to have reached an agreement with the Government of Chad. Chad is an important partner of Glencore‘s, and we look forward to working closely together across all aspects of our oil business,” said Alex Beard, Glencore’s head of oil.
A spokesman for Chad’s state oil firm said that the new terms included an extension of the maturity to 2030 from 2022, a two-year grace period on principal payments and a lower interest rate of Libor plus 2 percent, down from 7.5 percent.
In addition, the agreement includes a supply guarantee for the country’s refinery near the capital N‘Djamena.
During the negotiations, Glencore and the banks had offered an extension to 2025, a grace period with a lower interest rate of 4 percent for that period.
The IMF criticized the loan last year saying that the process of allocating payments to service the debt were opaque.
Negotiations became tense after the Chadian government threatened to divert oil from the Swiss trading house to U.S. energy company ExxonMobil.
Adding to the complications, Chad’s finance minister and deputy were sacked in November the week after a round of talks.
A finance ministry statement on Wednesday gave President Idriss Deby credit for pushing the deal through.
“The successful conclusion of these difficult negotiations is undeniably down to the diplomatic efforts of the president, who employed all his influence with institutions and friendly nations to have these terms accepted,” it said.
One of the world’s poorest nations, Chad is key in efforts to counter Islamist insurgencies in Africa’s Sahel region and is part of the G5 Sahel joint military force backed by France and the United States.
It has been weighed down by drought, a refugee crisis and a costly military campaign to combat militant group Boko Haram, which took over large swathes of neighboring Nigeria in 2014.