China Eximbank provides government concessional loan for MA60 Aircraft Acquisition Project (Linked to Record ID#33807)

Project narrative

In 2006, China Eximbank and the Government of Laos signed a government concessional loan (GCL) agreement for the MA60 Aircraft Acquisition Project. The borrowing terms of the loan are unknown. However, it is known that the borrower used to loan proceeds to finance a commercial contract between Lao Airlines and Xi'an Aircraft Industrial Corporation (XAC), which was signed in December 2005. The purpose of the project was to purchase two MA60 aircraft. XAC was the contractor responsible for implementation. The two aircraft purchased by Lao Airlines arrived at Vientiane Wattay International Airport on August 4, 2006 and September 28, 2006. On April 28, 2007, Lao Airlines held a nine-month celebration of the safe operation of the aircraft at the Vientiane Wattay International Airport. Lao Airlines President Song Fan attended the celebration. 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.