Chad’s Badoit deal with Glencore, renegotiated in June 2018 has repayment terms that depend specifically on the oil price. When the price of the locally produced oil blends is over a certain threshold (about $55/barrel) in a given year, both the amount of principal and the interest rate due increases [#7] & [#8].

São Tomé and Príncipe’s $30 million RBL from Nigeria for administering the Joint Development Zone in 2009 also presents an interesting case [#23]. Though São Tomé and Príncipe received and spent the loan funds, it is not servicing the loan because the RBL terms specified that repayments would be made from the revenue streams derived from the project. However, no oil project, and consequently no oil revenues, materialized. The loan (currently in dispute) provides a cautionary tale on lending against highly uncertain revenues.

The repayment structures presented above lead to lower repayment values when commodity prices are low, and higher when prices are up, and therefore have strong similarities with state-contingent debt instruments. Most of the loans discussed appear to have net present value (NPV) neutral features (i.e., lower repayment now attracts additional payment with interest later), although their merits would necessarily depend on key assumptions such as discount factor or collateral reference price. The renegotiated Chad-Glencore loan [#8] stands out as a case where the benefit of the interest reduction and maturity extension have been almost entirely cancelled by complex state-contingent clauses i.e., a “cash-sweep mechanism” (CSW). A CSW can be a useful instrument to make debt service proportional to oil sales. However, in the case of Chad, the CWS parameters were designed in a way to significantly favor Glencore in case of upside scenarios, without significantly reducing Chad’s debt burden in case of downside scenarios. In fact, at the time of the agreement, the oil price was close to 60 USD per barrel. The downside trigger was set at a very low level (42 USD) and this scenario, which materialized in 2020, involves very limited debt service reduction (1% principal deferral). Conversely, the upside triggers were below the spot oil price (between 53 and 57 USD), thus generating significant principal payment acceleration (more than 5%) and a rise in interest payment (+2%) in 2018-2019.

# h. Allocation of proceeds

Infrastructure projects are the most common sectors financed through RBL. Of the 30 resource-backed financings in SubSaharan Africa that were reviewed, 18 are for infrastructure projects including roads, energy, water supply, etc. Some of the very large credit lines are intended for multiple infrastructure projects. Angola’s first RBL in 2004 was a China Eximbank RBL that totaled $2bn and was disbursed for at least 50 different projects, averaging about $40 million each. The projects ranged from construction projects for schools and hospitals, power lines, water supply projects, and procurement of equipment and vehicles. These credit lines streamline the disbursement process such that both sides do not need to renegotiate every time a new project needs financing. This also means that credit line RBLs are often earmarked ahead of time.

Some RBLs are designated for specific projects, often large scale. Ghana contracted close to $600mn in a cocoa-backed RBL from China Eximbank for the construction of the Bui Hydropower Project in 2007 [#11] [#12]. A similar big-ticket item was Angola’s Kilamba Kiaxi New Town, a large-scale housing project in Angola, financed with a $2.5bn oil-backed loan from ICBC. What counts as “big-ticket items” varies by country [#5]. South Sudan’s Nadapal-Torit-Juba Road cost around $169mn and was financed through oil-backed China Eximbank loans [#27]. This amount may sound relatively small compared to those in Ghana and Angola, but is nonetheless the largest loan that South Sudan had contracted with China as of 2020.25 There are several possible drivers as to why RBLs tend to flow into infrastructure projects. These are often low internal return rate projects that would not

> 25 CARI data set. The second largest is the New Juba Airport loan, $158mn from Eximbank in 2013.

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