China Eximbank provides $16.7 million concessional loan for Lao Airlines Hangar and Maintenance Training Center Project

Project narrative

In 2010, China Eximbank and the Government of Laos signed a $16.7 million concessional loan agreement for the Lao Airlines Hangar and Maintenance Training Center Project. The loan’s estimated borrowing terms included a 20.0281-year maturity, a 7.2533-year grace period, and a 2.0702% interest rate. The project involved the construction of a hangar and maintenance training center at Wattay International Airport, which is located 3 km outside the city of Vientiane. The project covered an area of 36,400 square meters with a total construction area of about 15,000 square meters. It included the construction of a maintenance hangar, a training center, corridors, a parking lot, outdoor facilities, and landscaping. The project was designed to promote the development of aviation industries in Laos, and provide a solid foundation for its route expansion in developed countries. Xi’an Aircraft Industry (Group) Company Ltd. and Yunnan Construction Engineering Group Co., Ltd. were the contractors responsible for implementation. The project commenced on November 15, 2010 and then a formal groundbreaking ceremony took place on January 20, 2011. Project implementation ended on March 15, 2012. However, a project completion ceremony was not held until June 21, 2016. There are multiple indications that the China Eximbank loan for this project may have financially underperformed vis-a-vis the original expectations of the lender. In 2020, the Laotian authorities urgently sought debt relief from China Eximbank. At that time, the gross reserves of the Bank of Laos stood at only 1.5 months of import cover and credit rating agencies warned of a high default probability. In 2020, China Eximbank also agreed to reprofile multiple loan agreements that it had previously signed with the Government of Laos (as captured via Record ID#96464). These debt service payment deferrals lasted for approximately 4 years (2020 and 2023) and provided approximately $1.892 billion of cash flow relief ($1.422 billion in deferred principal payments and $470 million in deferred interest payments). Deferred principal and interest repayments in 2020 were worth $202 million. Deferred principal and interest payments were worth $426 million in 2021. Deferred principal and interest payments were worth $594 million in 2022. Deferred principal and interest payments were worth $670 million in 2023.