CDB extends $2.5 billion master facility agreement to Angola in May 2014

On May 9, 2014, China Development Bank (CDB) entered into a $2.5 billion master facility agreement with the Government of Angola. The agreement is a master agreement under which the Government of Angola and CDB may conclude individual loan agreements (ILAs) for the purpose of financing up to 85% of the contract price owing to certain approved contractors in respect of certain approved infrastructure projects in Angola, primarily in the areas of housing, transportation, agriculture, roads and railways, hospitals, schools, telecommunication, water and electricity, sanitation and other human livelihood areas agreed by CDB and Angola. Each individual (subsidiary) loan approved through the facility must be for a minimum of $10 million and have a maturity of 10 years. As of December 31, 2017, $2,199,500,000 was drawn down under the MLFA. The (principal) amount outstanding under the MLFA was $300.5 million as of December 31, 2017 and $2.1 billion as of December 31, 2021. The availability period for drawdowns under this master facility agreement ended on May 9, 2017. However, it was later extended until 2021. Projects that may have been funded through the master facility agreement include: 1. Construction of access roads to Luanda International Airport (Project ID#65307) 2. Rehabilitation of New Luanda International Airport (Project ID#72349) There are indications that the May 2014 CDB loan financially underperformed vis-a-vis the original expectations of the lender. In December 2020, CDB and the Government of Angola entered into an agreement to reprofile multiple loan agreements that they had previously signed, including the $15 billion loan agreement from December 2015. The December 2020 agreement included (i) a three-year deferral of principal payments; and (ii) repayment of deferred principal falling due in 2020H2–2023H1 over seven years after the grace period, with some additional modest relief of principal in 2024–25. The Government of Angola also agreed to use the outstanding cash balance in an escrow account — known as the Debt Service Reserve Account (DSRA) — to make interest payments to the CDB between 2020 to 2022, which it expected would bring the DSRA balance to nearly zero by mid-2022. However, under the terms of the debt reprofiling agreement, the parties agreed that the borrower would need to replenish the DSRA to approximately $1.5 billion (the minimum cash balance previously agreed upon by the lender and borrower) by 2023.

Additional details

1. This project is not categorized as an umbrella record because the full amount of the facility was disbursed. However, AidData was not able to identify all of the subsidiary loans and the face values of all subsidiary loans approved through this facility. Therefore, to eliminate the risk of double counting, AidData does not record transaction amounts for the subsidiary loans. Instead, it records the amount that the borrower drew down ($2,199,500,000) from this facility. 2. According to China Development Bank's website, it provided Angola's Ministry of Finance with a $4 billion ‘sovereign loan’, which is a specific type of loan that only CDB issues (Chinese name: 主权类外汇贷款). It is likely that this $2.5 billion credit line (MLFA) is part of the $4 billion sovereign loan that is referenced. The remaining $1.5 billion is likely captured via Project ID#67. 3. Given that CDB agreed to issue individual loans to finance up to 85% of the cost of commercial contracts, AidData assumes that these individual loans were issued in the form of buyer's credits. This issue warrants further investigation. 4. The loan's interest rate and grace period are unknown. For the time being, AidData relies on the interest rate (3.7873%) and grace period (1.9008 years) identified in the World Bank's Debtor Reporting System (DRS) for official sector Chinese lending to Angola in 2014. See https://www.dropbox.com/s/949n5rctiue6d7c/IDS_Average_grace_period_and_maturity_on_new_external_debt_commitments.xlsx?dl=0 and https://www.dropbox.com/s/ab8qt4n6jijcbhd/IDS_Average%20interest%20on%20new%20external%20debt%20commitments.xlsx?dl=0

Number of official sources

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