China Eximbank provides $14 million preferential buyer's credit for MATGENIE Company Rehabilitation Project

Project narrative

On March 24, 2010, China Eximbank and the Ministry of Economy, Planning and Regional Development of the Republic of Cameroon signed a preferential buyer credit (PBC) loan agreement [CHINA EXIMBANK PBC NO. (2010) 6 TOTAL NO. (113) LOAN SERIAL NO.1290003992010210055] worth $14,000,000 (EUR 9,533,609) for the Matgenie Company Rehabilitation Project. The PBC carried the following borrowing terms: an interest rate of 2%, a 0% default (penalty) interest rate, a maturity of 20 years, and a 3 year grace period. The proceeds of the loan were to be used by the borrower to finance 75.65% of the total cost (EUR 12,602,568) of a commercial contract [#AFO9O7OUG] between Dingsheng Tiangong Construction Machinery Co., Ltd. and the Ministry of Economy, Planning and Regional Development of Cameroon, which was signed on March 13, 2009. As of December 31, 2020, the PBC had achieved a 100% disbursement rate and its outstanding amount was equivalent to CFA 4.9 billion. The purpose of the project was to facilitate the acquisition of 60 graders, 20 roller compactors, 10 loaders, 10 backhoe loaders and 20 bulldozers. The equipment was to be used for the construction of larger infrastructure projects including over 50,000 km of roads and harbors. Dingsheng Tiangong Construction Machinery Co., Ltd. was the contractor responsible for project implementation. On March 29, 2011, a delivery ceremony was organized to officially hand over these 120 pieces of equipment. There are some indications that the China Eximbank loan for the MATGENIE Company Rehabilitation Project may have financially underperformed vis-a-vis the original expectations of the lender. In January 2019, Cameroon unilaterally withheld debt service payments to China Eximbank. The lender responded by withholding new loan disbursements. Then, in July 2019, China Eximbank and the Government of Cameroon signed a debt rescheduling agreement (as captured via Record ID#88213). Under the terms of the agreement, China Eximbank agreed to reschedule 18 loans previously contracted by the Government of Cameroon — with scheduled principal repayments between July 2019 and March 2022 — by allowing the borrower to defer scheduled principal repayments between July 2019 and March 2022 to later dates but without any maturity extensions. The total amount of restructured debt was equivalent CFA 148 billion ($253 million) — or 70% of the loan principal that was scheduled for repayment between July 2019 and March 2022. Under the terms of the agreement, the Government of Cameroon agreed to repay 30% of the loan principal according to the original July 2019-March 2022 schedule (i.e. without any payment deferrals). The lender and the borrower also agreed to cancel the committed but undisbursed loan balances worth approximately CFA 10 billion (for certain loans with disbursement deadlines that had already passed). Then, in January 2020, the International Monetary Fund (IMF) classified the Government Cameroon as facing a high risk of debt distress. Eighteen months later, during an address before Cameroon’s National Assembly on June 28, 2021, the Minister of Water and Energy (MINEE) Gaston Eloundou Esommba provided an update on the ICBC-financed Bini à Warak Hydroelectric Power Plant Project. He noted that the project had been 'on hold' since November 2019 because ICBC suspended the loan agreement, even though the Government of Cameroon had already mobilized XAF 22 billion of counterpart funding. He also explained that 'the reason for this suspension is that Cameroon did not settle some of its debts towards China on time, so, it is in a cross-default situation.’