Glencore ready to enter Chad debt talks, paving way for IMF program

Glencore (GLEN.L) is ready to enter into negotiations on restructuring Chad's more than $1 billion of commercial debt, paving the way for the IMF to move forward with a lending program, sources familiar with the matter said on Thursday.

Chad had received support for a restructuring from its official creditors in June but until now had not been given a so-called letters of assurance on entering negotiations in good faith by mining group Glencore and other private lenders.

The restructuring of Chad's total debt, which the International Monetary Fund has described as unsustainable, is a prerequisite for the Central African country to benefit from further financial support.

The African country has previously said that Glencore accounts for more than 98% of its commercial debt, most of it in oil-for-cash deals dating back to 2013 and 2014.

In January, Chad became the first country to request a restructuring of its external debt of $3 billion under a common framework agreed last year by China and other Group of 20 members and the Paris Club of major creditor countries.

And while Chad's state creditors and the IMF have agreed on a restructuring, they had insisted that it also reach comparable terms with other bilateral and private creditors.

In a letter dated November 10 and seen by Reuters, Glencore confirmed that it, together with the group of lenders made up of 16 institutions, "are committed to good faith discussions" with the country’s government and its state oil firm SHT.

Any renegotiation of its contracts with Chad "would need to be on the basis of fair burden sharing, which would need to take into account the concessions granted by Glencore and the Lenders in the past restructurings," the letter added.

Glencore also said it acknowledged the aim of concluding any overhaul before the first review of an IMF programme, which was expected at the earliest in May 2022.

Glencore declined to comment on Friday.

In a separate statement, the IMF said late on Thursday it was working with Chadian authorities to bring a new lending program to the IMF's board for approval after the country's main private sector creditor committed to engaging in "good faith discussions" about restructuring the country's debt.

It did not name Glencore specifically.

Abebe Aemro Selassie, director of the IMF's African department, said IMF staff aimed to submit a new Extended Credit Facility for Chad to the board for its consideration "as soon as possible," but gave no specific timetable or additional details.

One of the sources said the goal was to complete work on the new arrangement by the end of the year.

Chad, Zambia and Ethiopia are the only countries that have sought debt treatment under the G20 Common Framework.

Progress with Chad could help encourage others to seek help under the G20 program, IMF and World Bank officials have said.

Glencore and a consortium of banks began talks with Chad over restructuring its commercial debt in October.

Chad was thrown into political turmoil in April after the battlefield death of former President Idriss Deby, and its economic outlook has worsened due to the coronavirus pandemic, attacks by rebels in the north, and delays in financial support.

Its debt has already been restructured twice, in 2015 and 2018.