Angolan oil loan likely to raise transparency issues

Oct 10, 2005 02:00 AM

by John Reed

Angola's state-owned oil company is raising a $ 2 bn syndicated loan in a transaction likely to focus fresh attention on financial transparency in Africa's second-largest oil-producing country.
France's Calyon is lead manager for the seven-year loan to Sonangol, which is now in syndication. Banking sources said the loan, to be backed by oil revenues, is priced at 250 basis points over Libor and will go towards financing oil production and gas projects and to repay a previous oil-backed loan.

Anti-corruption campaigners have reacted critically to rumours of the loan. It will be large by the standards of syndicated lending to Africa, especially to a corporate borrower.
Global Witness, a non-governmental organisation whose backers include US philanthropist George Soros, recently called Angola “one of the most corrupt and impoverished countries in the world” and criticised western banks for “aiding and abetting” the country's government.
“Banks participating in this deal will be complicit in perpetuating the country's chronic corruption and poverty,” the London-based group said.

In 2004 Standard Chartered was the lead arranger for a similar $ 2.35 bn (EUR 1.9 bn, £ 1.3 bn) loan. Angola has no current financing agreement with the International Monetary Fund, which has criticised it in the past for poor financial transparency. According to the IMF, between 1997 and 2001, some $ 8.45 bn worth of public money was unaccounted for.
China has proved willing to lend to Angola where the IMF has hesitated. Last year China's ExImBank approved a $ 2 bn loan to rebuild infrastructure devastated or neglected during the country's long civil war.

Despite its large reserves of oil and diamonds, Angola remains one of the world's poorest countries, with most citizens living on less than $ 2 a day. President José Eduardo dos Santos, the country's president, who last stood for election in 1992, is believed to be one of Angola's richest men.
Earlier this year, Sonangol discontinued talks with J.P. Morgan on a possible bond issue. The bond would have required Sonangol to open itself to a greater degree of outside scrutiny than does the syndication.

However, unlike previous oil-backed loans to Sonangol, the current loan is designated for the oil company's use only. In apparent response to IMF criticism, Angola's government is making efforts to separate Sonangol's finances from those of the state.
Unipec, the trading arm of Chinese petroleum company Sinopec, will act as the long-term purchaser of Sonangol's oil to back up the loan. Angola's oil production is second in Africa only to Nigeria's.

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