The Republic of Congo plans to issue Eurobonds linked to oil warrants to refinance its outstanding debts to commodity traders Glencore Plc and Trafigura Group, according to a report by Bloomberg.
The deal, expected to launch later this month, is structured as a “debt-neutral” transaction, meaning it will be solely used to refinance about $1.4 billion of the oil traders’ loans and won’t impact the nation’s debt load.
Citigroup Inc. and Deutsche Bank AG are structuring the bond, while financial advisory firm Rothschild & Co. is working with the government, they said.
The offering comes after oil prices surged more than 40% this year as the war in Ukraine disrupted flows. For Congo, which is currently servicing its external debt using crude, linking the debt to oil warrants will enable the sovereign to hedge its external payments against the cycle of crude prices.
The deal is being arranged in a way that Congo will have to pay more interest on the bonds when oil prices are high and less when prices fall.
The Republic of Congo’s government announced in 2018 that it was seeking to restructure its debts. At the time, a report by the French Embassy in Congo said those debts included 1.2 trillion CFA francs ($2 billion) owed to companies including Glencore and Trafigura. The IMF made a restructuring of Congo’s loans a requirement before providing the central African nation with a bailout oil price plunged.
In January, the IMF estimated that Congo’s external debt stands at $6.88 billion, including $2.97 billion owed to undisclosed commercial creditors. Due to arrears and continuing negotiations with an external commercial creditor, debt is classified as “in distress,” the IMF said in a January report.
Read also; IMF Approves $455 Million Loan for Congo.
