FAST FIVE: Poor Countries Borrowed Billions Using Their Oil As Collateral And Are Now Struggling To Pay
The deals are structured so that countries are advanced money from trading houses that will be paid back in future oil shipments.
These types of loans have become popular with smaller African and Middle Eastern nations as the only way to raise money.
US investors find themselves with exposure to $500 million in Kurdistan-based loans, as US pension funds bought half a billion dollars worth of notes “known as Oilflow SPV 1 DAC linked to the loans”.
These notes have plunged in value due to the potential restructuring, falling to 80 cents on the dollar and a yield of more than 40% (the yield at par was 12%). Glencore, along with Trafigura Group, are also together in talks to restructure a total of $1.5 billion in oil-for-cash loans from the Republic of Congo.
It is allowed to reduce its payments when oil falls under $42 per barrel.