CDB provides first, $5 billion loan tranche to Petrobras to help it meet its repayment obligations (Linked to Project ID#53067 and ID#59384)

On February 26, 2016, Petroleo Brasileiro S.A. (Petrobras) and China Development Bank (CDB) signed a term sheet for a $10 billion line of credit (captured via Project ID#53067). The line of credit was to be disbursed in two, $5 billion tranches (with 10 year maturities and 4.2325% interest rates) and used by the borrower to address its maturing debt obligations. Petrobras and CDB signed a $5 billion agreement for the first loan tranche on December 15, 2016 (captured via Project ID#53068). This loan tranche disbursed on December 22, 2016. Then, on December 14, 2017, Petrobras and CDB signed a $5 billion agreement for the second loan tranche (captured via Project ID#59384), which fully disbursed in December 2017 and January 2018. As a source of collateral for the first loan tranche, Petrobras signed oil-supply contracts with three Chinese companies [China National United Oil Corporation (a subsidiary of CNPC), China Zhenhua Oil Co. Ltd. (a subsidiary of NORINCO), and Chemchina Petrochemical Co. Ltd (a subsidiary of ChemChina)] on December 15, 2016. Under each contract, Petrobras agreed to sell 100,000 barrels of oil per day for 10 years at market prices. As a source of collateral for the second loan tranche, Petrobras signed an oil-supply contract with UNIPEC Asia — Sinopec’s (subsidiary) trading company — and agreed to provide 100,000 barrels per day for 10 years at market prices. Petrobras reportedly repaid a small portion of the $10 billion debt between 2016 and 2018. However, by the end of 2019, it had repaid $8 billion (including a $5 billion repayment on December 16, 2019).

Additional details

1. Most of China’s oil-backed loan agreements involve a bank, an oil company, and a trading firm. An oil company in the borrower country must sell a certain number of barrels during a specific period, and payments for the oil are sent directly to the bank. Therefore, the borrower uses the proceeds of oil sales to meet its loan repayment obligations. 2. Multiple sources indicate that the first tranche and the second tranche fully disbursed. The first tranche was reportedly provided in two payments: a $3.5 billion payment and a $1.5 billion payment. The second tranche was reportedly provided in a $3 billion payment (on December 14, 2017) and a $2 billion payment (on January 26, 2018). 3. The loan's interest rate (4.2325%) is recorded in the World Bank's Debtor Reporting System (DRS). See https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0 and https://www.dropbox.com/s/2sw4f7gluxa52fk/DRS%20Official%20Commitments%20from%20China%20Through%202021.xlsx?dl=0

Number of official sources

8

Number of total sources

12