Exclusive-Glencore, Chad creditors agree in principle on terms of debt treatment - source

By Andrea Shalal

WASHINGTON (Reuters) - Switzerland-based Glencore, China and Chad's other creditors have reached an agreement in principle on restructuring the African country's nearly $3 billion in external debt, a source close to the negotiations said on Thursday.

The deal, which should be finalized in coming days, will be the first completed under a framework created by the Group of 20 major economies and the Paris Club in late 2020 to help poor countries weather the COVID pandemic, as well as China's first participation in joint debt treatment deal with other creditors, said the source, who was not authorized to speak publicly.

Chad's bilateral creditors - China, France, India and Saudi Arabia - agreed several weeks ago that the country did not require debt relief at the moment given higher oil prices that boosted the revenues of the oil-producing nation, but pledged to reconvene and offer Chad help if needed.

Glencore, a major private creditor, agreed late in October or early November to join the other creditors, the source said. Chad owes one third of its external debt to commercial creditors, and almost all of that to Glencore in oil-for-cash deals dating back to 2013 and 2014.

Chad, the first country to ask for a debt deal under the G20 common framework, had struck an initial agreement with creditor nations in June 2021, but then struggled to finalize an agreement with Glencore and other private creditors.

The agreement calls for Chad's creditors to reprofile, or reschedule, Chad's debt in 2024, the last year of its current $572 million Extended Credit Facility (ECF) with the International Monetary Fund (IMF), to ensure that its debt level remains below the threshold of "moderate risk of debt distress."

"It's excellent news, in terms of a breakthrough in the mindset of different stakeholders," said the source, adding that the agreement could pave the way for a few other heavily indebted countries to seek help.

It was not immediately clear how much of Chad's debt - which stood at around $2.8 billion, or 24.2% of gross domestic product at the end of 2020 - would be extended or for which time period, with those details to be worked out later, depending on oil prices and other factors, the source said.

Together with Ethiopia and Zambia, Chad is one of three countries to have sought a debt restructuring under the G20 initiative, but progress toward an agreement has been glacial.

World Bank and IMF officials, as well as Western finance officials, have grown increasingly frustrated about what they see as foot-dragging by China in addressing debt issues, despite its role as the world's largest sovereign creditor.

The agreement now reached marks progress and reflects growing trust among creditors, including China, as they negotiate on debt issues, the source said.

Chad's creditor committee is co-chaired by France and Saudi Arabia.

No comment was immediately available from the Paris Club, Glencore.

(Reporting by Andrea Shalal; additional reporting by Karin Strohecker in London; Editing by Lincoln Feast)