Both products are usually a fixed interest rate of 1 to 3% – usually about 2% – with an additional five years and a tone of up to 20 years. In general, comparable granting loans tend to offer more favourable prices and conditions than preferential loans to buyers. By way of comparison, a study published by the Centre for Global Development (CGD) in April 2020 showed that World Bank loans to developing countries were granted at a fixed interest rate of 1.54%, at a grace period of 10 years and at 40 years. Lenders should check whether COVID-19-related relief measures are compromising their ability to accelerate and/or implement a late loan. It is interesting to note that a number of lenders, given that the pandemic has had an impact not only on life, but also on livelihoods, have also begun to question whether the courts have or want to intervene to ease the burden on debtors linked to COVID 19 in the event of a debt dispute. Concession credits and preferential credits are subsidized on different budgets. As a result, the loans granted will be denominated in RMB and preferential loans for buyers on usd. The two products also have different matching financing agreements. Concessional loans can finance 100% of the project cost, while loans to the buyer with a preferential benefit can only finance up to 85% of the project cost. Buyer`s loans used to finance the purchase of goods and services from China may be granted on concession or commercial terms. At the time of the letter, it is increasingly likely that LIBOR will disappear at the end (or even before) 2021 and that some kind of RFR methodology will replace it.
However, there is still a huge legacy of existing loan contracts, which need to be amended individually, and the problem grows with each passing day. It is clear that credit markets (including borrowers, lenders, agent banks and other financial intermediaries) need to prepare quickly for the decline of LIBOR, and much remains to be done. Unlike MOFCOM`s interest-free loans, loans from other Chinese lenders are not financed from the state budget and any default will have a direct impact on their balance sheets. Individual Chinese bankers can also be personally disciplined for defaulting loans. Therefore, as far as we know, Chinese lenders have never agreed on a total debt cancellation and these loans must either be restructured or refinanced. Many borrowers expect their revolving loan to be renewed (sometimes automatically) for each interest period (usually for 1, 3 or 6 month intervals) until the end of the facility period (which can range from 1 to 5 years for a working capital mechanism). In this context, we highlight the impact of moratoriums, significant negative changes, market disruptions, halting of operations, force majeure and frustration on debt financing in Asia. The impact of legal, regulatory and documentary guarantees on loan financing.