Julia Payne

LONDON (Reuters] – Glencore and a consortium banks have begun talks with Chad regarding the restructuring of more than $1Billion of country’s commercial debt. This is according to a letter that Glencore sent to the International Monetary Fund, which was seen Saturday.

Chad requested in January a restructuring of its debt. It was the first country that had done so within the framework of the Paris Club, China and other Group 20 member countries.

The IMF and Chad’s creditors agreed to a restructuring, but Chad insists on comparable terms with bilateral and private creditors.

Glencore stated in the letter, that it had been collaborating with 16 lenders to engage with Chad as well as their advisors in a constructive and good-faith manner following an invitation from the country for negotiations.

“The lender group has held initial meetings with Rothschild & Cie, Chad’s financial advisors, and subsequently with the official creditor committee for Chad in the past week to exchange views on Chad’s request,” the Oct. 15 letter said.

In the letter, Newstate Partners, a boutique advisory firm, was also mentioned as having been named financial advisor to Glencore (a Swiss-based miner/trader) and the consortium.

Restructuring Chad’s $3 billion total debt, which IMF described as unsustainable by the IMF, is necessary for Central African countries to receive financial assistance.

In April, Chad experienced political instability following the death of Idriss Deby, the former president. Meanwhile, the coronavirus epidemic, rebel attacks in the north and delays in financial support have dragged down its economic prospects.

Chad stated that Glencore represented over 98% of the country’s commercial debt. Most of the Glencore was oil-for-cash contracts made in 2013, and 2014, when it could not access the bilateral or international markets.

Already in 2015 and 2018, restructuring of the debt took place.

Glencore stated in a letter that the concessions granted by the lenders to Chad during the past restructurings would have to be considered in relation to the present restructuring request.

The 2018 terms were revised to include an extension of maturity from 2022 to 2030, principal payment grace periods of two years, and a lower Libor Plus 2% interest rate, which is now 2% below 7.5%.

Sources with direct knowledge said that the previous restructuring had made it possible to service the debt with crude oil prices hovering around $45 per barrel. Last week, they were at $85 per barrel.