ICBC provides $368.9 million buyer's credit for Phase 2 of 7000 Housing Units Project (Linked to Record ID#54282 and #54276)

Project narrative

On April 24, 2017, the Industrial and Commercial Bank of China (ICBC) provided a $368.9 million buyer’s credit (loan) facility agreement with the Housing Development Corporation (HDC) — a state-owned enterprise in the Maldives — for Phase 2 of the 7000 Housing Units Project. The loan carries the following borrowing terms: a maturity of 15 years, a grace period of 2 years, and an annual interest rate of LIBOR plus a 3.3% margin. The loan is backed by a sovereign guarantee from the Ministry of Finance and Treasury of the Government of Maldives. The borrower was expected to use the proceeds of the loan to finance 85% of the cost of a $434 million commercial contract with China State Construction Engineering Corporation (CSCEC). HDC contracted a $65.1 million loan from the Singapore Branch of Credit Suisse AG on December 13, 2017 to finance the other 15% of the commercial contract cost. The first ICBC loan disbursement took place on April 20, 2018. Total loan disbursements amounted to $209,076,876.84 by September 2018 and $221,098,337 by December 31, 2018. ICBC made additional loan disbursements to HDC worth $87,286,256 during calendar year 2020. The borrower made loan repayments to ICBC worth $14,188,462 during calendar year 2020, $14,820,153 during calendar year 2021, $29,658,764 during calendar year 2022, and $29,763,122 during calendar year 2023. The ICBC loan’s amount outstanding was $209,076,877 as of September 2018, $221,098,337 as of December 31, 2018, $281,613,744 as of December 31, 2019, $354,711,539 as of December 31, 2020, $339,891,386 as of December 31, 2021, $310,232,622 as of December 31, 2022, and $280,469,500 as of December 31, 2023. The purpose of the project was to construct 7,000 apartments in Hulhumalé. The project involved the construction of 16 high-rise (25 story) buildings and 451,900 square meters of floor space. Each housing unit was to measure 550 square feet, featuring two bedrooms and two bathrooms. Upon completion, the ‘social housing’ project was expected to provide public housing for nearly 30,000 people and created approximately 1,600 jobs for local communities. All construction materials such as steel and cement were to be transported from China. China State Construction Engineering Corporation (CSCEC) was the contractor responsible for project implementation. As of October 2017, it was expected that the 7,000 housing units would be complete by the end of 2018. CSCEC began work on the project on November 18, 2017, after a groundbreaking ceremony attended by Maldives President Abdulla Yameen. The project was officially completed on April 7, 2020, despite complications resulting form the COVID-19 pandemic. However, there were still construction activities underway in May 2020, with CSEC and HDC constructing labor quarters in Hulhumalé Phase II. There are some indications that the ICBC loan has underperformed financially and that the borrower (HDC) has had difficulty meeting its repayment obligations to the lender. On October 18, 2018 HDC entered into a short-term loan agreement with the Maldives Ministry of Finance and Treasury amounting to MVR 94 million for the purpose of refinancing the interest payment obligation falling due in the month of April 2019 under the ICBC loan agreement for Phase 2 of the 7000 Housing Units Project. The disbursement of the loan was made on October 18, 2018. The loan was obtained for a duration of 6 months, and it was repayable over two equal installments with first repayment starting after a grace period of two months from the date of disbursement; interest was charged and payable on a monthly basis at a rate of 9% per annum. Then, on April 22, 2019. HDC entered into a short-term loan agreement with the Maldives Ministry of Finance and Treasury amounting to MVR 106,496,611 for the purpose of refinancing the interest payment obligation falling due in the month of October 2019 under the ICBC loan agreement for Phase 2 of the 7000 Housing Units Project. The disbursement of the loan was made on April 22, 2019. The loan was obtained for a duration of 24 months, and it was repayable in monthly installments from the date of disbursement; interest was charged and payable on a monthly basis at a rate of 10% per annum. Then, on July 18, 2019, HDC entered into a short-term loan agreement with the Ministry of Finance and Treasury amounting to MVR 37,464,962.45 for the purpose of refinancing the interest payment obligation falling due in the month of July 2019 under the Credit Suisse AG loan agreement for Phase 2 of the 7000 Housing Units Project. The disbursement of the loan was made on July 18, 2019. The loan was obtained for a duration of 12 months, and it was repayable in monthly installments from the date of disbursement; interest was charged and payable on a monthly basis at a rate of 10% per annum.