China Eximbank provides RMB 430 million government concessional loan for MA60 Aircraft Acquisition Project (Linked to Record ID#58109, 88213)

Project narrative

On November 11, 2013, China Eximbank and Cameroon's Ministry of Economy, Planning, and Regional Development (MINEPAT) signed a framework agreement for a government concessional loan (GCL) worth RMB 430 million for the MA60 Aircraft Acquisition Project. The GCL was signed on the same day by both parties, but the precise commitment date is unknown. The framework agreement specified the borrowing terms of the loan: a 20 year maturity, a 5 year grace period, and a 2% interest rate. The loan, which was on-lent to La Cameroon Airlines Corporation (Camair-Co), was collateralized against the future revenues of the MA60 aircraft. Under the terms of a Repayment Mechanism Agreement, the borrower was expected to deposit these revenues in an escrow account (compte séquestre) and maintain a minimum cash balance in the escrow account equivalent to two, semi-annual debt service (principal, interest, and fee) payments. As of December 31, 2020, the loan (GCL) had achieved a 89.8% disbursement rate. Its principal amount outstanding was equivalent to CFA 30.7 billion as of December 31, 2020. The purpose of the project was to facilitate the acquisition of three MA60 Chinese aircraft that would be added to the fleet of the state-owned Cameroon Airlines Corporation. This project was part of a "buy two get one free" deal. China Development Bank provided a RMB 215 million grant to the Government of Cameroon for the acquisition of one MA60 aircraft (as captured via Record ID#58109), and the Government of Cameroon agreed to borrow RMB 430 million from China Eximbank for the acquisition of two additional MA-60 aircraft. AVIC was the contractor responsible for implementation. The two aircraft purchased with the proceeds of the China Eximbank loan were delivered on April 1, 2015. A few months before their delivery, a controversy arose in Cameroon around the quality and reliability of the planes. The Chinese Ambassador to Cameroon at the time, Wo Ruidi, defended the deal and said that the “MA-60s are reliable”. Then, on March 10, 2019, the tail of one of the MA60s struck the ground during a landing at Bafoussam-Bamougoum airport. The Civil Aviation Authority of Cameroon suspended continued use of the aircraft until proof of its airworthiness could be provided. It was also recommended that La Cameroon Airlines Corporation (Camair-Co) contact the manufacturer (AVIC). There are some indications that the China Eximbank loan for the MA60 Aircraft Acquisition 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.’ Then, in its 2023 annual report, La Caisse Autonome d'Amortissement du Cameroun (CAA) disclosed that Camair-Co had not complied with the minimum account balance requirement under its Repayment Mechanism Agreement with China Eximbank due to the non-operational nature of its MA-60 aircraft.