SocGen, BNP Among Banks Exposed to Ivorian Cocoa Firm

(Bloomberg) -- Lenders in Ivory Coast are threatening to stop financing cocoa exports unless the government halts the liquidation of a local shipping company, with units of BNP Paribas SA and Societe Generale SA among banks exposed to debt that may not be repaid, according to people familiar with the matter.

Banks and the government are continuing talks after a court on July 18 ordered the liquidation of Saf-Cacao, which two years ago was the country’s second-biggest shipper of beans, said the people, who asked not to be identified because they’re not authorized to speak publicly about the matter.

The order was granted after an application by the industry regulator of the world’s biggest cocoa producer, which is seeking to recuperate 7 billion CFA francs ($12 million) in debt, people familiar with the matter said last week. Banks are exposed to more than 150 billion francs in unpaid loans and are arguing that lenders stand a better chance of recovering the money if Saf-Cacao continues to trade, they said.

Saf-Cacao’s debt to Ecobank Cote d’Ivoire totals about 15.5 billion francs and it owes 12.7 billion francs to the SocGen unit, said the people. It also owes 7.4 billion francs to the local unit of BNP Paribas SA, 38.5 billion francs to banks of Groupe NSIA, 13.1 billion CFA francs to Banque Atlantique of Cote d’Ivoire and 11.8 billion to Societe Ivoirienne de Banque, according to the people.

While Saf-Cacao has about 55,000 metric tons of cocoa in its warehouses, a portion of the stock is probably of poor quality and of little value after being locked up for months, said two people familiar with the matter.

Contract Defaults

Spokesmen for the units of Ecobank, SocGen, BNP, NSIA, SIB, Banque Atlantique and cocoa regulator Le Conseil du Cafe-Cacao in Abidjan declined to comment when contacted by phone. Government spokesman Sidi Toure and Saf-Cacao liquidator Alain Guillemain didn’t answer calls seeking comment.

The liquidation of Saf-Cacao comes as banks are still recovering from last season’s wave of contract defaults when shippers reneged on purchasing more than 200,000 tons of cocoa after betting wrongly that prices would rise. Non-performing loans in the banking sector rose to 9.9 percent at the end of 2017, from 9 percent the year before, according to the International Monetary Fund.

Saf-Cacao’s liquidation signals a major turnaround for one of Ivory Coast’s biggest cocoa exporters. The shipper slipped out of the top 10 exporters by size for the main harvest that ended in March, and was cited by KPMG in an audit commissioned by the regulator for 22,425 metric tons in contract defaults during the two years through September.

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