ICBC provides $30.9 million loan for Design and Construction of the Link Road Connecting Hulhulé and Hulhumalé (Linked to Record ID#38082, #38037)

ICBC provides $30.9 million loan for Design and Construction of the Link Road Connecting Hulhulé and Hulhumalé On December 7, 2017, during the state visit of Maldives President Abdulla Yameen to China, the Housing Development Corporation (HDC) and the Industrial and Commercial Bank of China (ICBC) signed a facility agreement for the Design and Construction of Link Road Connecting Hulhulé and Hulhumalé Project.

The $30,951,638 term loan agreement was finalized by the parties on January 8, 2018.

The Government of Maldives provided a sovereign guarantee for the loan.

The borrower was expected to use the proceeds of the loan to finance 85% of the cost a commercial contract between HDC and Hunan Construction Engineering Group, which was signed on April 19, 2017. The first ICBC loan disbursement took place on March 5, 2018. Total loan disbursements as of December 31, 2018 amounted to $24,584,350.

HDC made loan repayments to ICBC worth $1,719,536 in 2018, $3,439,071 in 2020, $1,862,830 in 2021, $3,725,660 in 2022, and $3,725,680 in 2023.

According to the Maldives Ministry of Finance, the loan’s amount outstanding was $1,719,536 as of December 31, 2017, $22,864,814 as of December 31, 2018, $25,793,032 as of December 31, 2019, $22,353,961 as of December 31, 2020, $20,491,131 as of December 31, 2021, $16,765,471 as of December 31, 2022, and $13,039,791 as of December 31, 2023.

The purpose of the project was to to link Hulhulé and Hulhumalé, adding road transport that would allow people to travel between the capital, the airport, and the suburbs by road with ease; currently, ferries are the primary mode of transport between the three islands.

The current causeway that linked Hulhulé and Hulhumalé ran from Hulhulé’s southern end to the eastern coast of Hulhumalé; this project was to expand it and reinforce the new highway. The link road was to be 4 kilometers long and have four lanes.

In order to build the road, land reclamation of some of Hulhule’s lagoon was necessary, as was sheet piling, coastal reinforcement, the laying of water pipes, and pavement. Hunan Construction Engineering Group was the contractor responsible for project implementation. In December 2016, it was expected that the project would commenced in January 2017 and reach completion by April 2018.

Land reclamation began on September 11, 2017.

Then, on August 14, 2018, the Maldives Times reported that the construction of the road had achieved an 82% completion rate. The project was ultimately completed in October 2019.

There are some indications that the ICBC loan has underperformed financially and that the borrower (HDC) has had difficulty meeting its repayment obligations to the lender.

On June 20, 2019, HDC entered into a short-term loan agreement with the Maldives Ministry of Finance and Treasury amounting to MVR 84,764,552 for the purpose of refinancing the interest payment obligation falling due in the month of June 2019 under the ICBC loan agreement for the Design and Construction of the Link Road Connecting Hulhulé and Hulhumalé Project (and a separate loan agreement with Seylan Bank).

The disbursement of the loan was made on June 20, 2019.

The loan was obtained for a duration of 24 months, and it was repayable in monthly installments from the date of disbursement; interest was charged and payable on a monthly basis at a rate of 10% per annum.

Then, on December 26, 2019, HDC entered into a short-term loan agreement with the Maldives Ministry of Finance and Treasury amounting to MVR 11 for the purpose of refinancing the interest payment obligation falling due in the month of December 2019 under the ICBC loan agreement for the Design and Construction of the Link Road Connecting Hulhulé and Hulhumalé Project (and a separate loan agreement with Seylan Bank).

The disbursement of the loan was made on December 26, 2019.

The loan was obtained for a duration of 24 months, and it was repayable in monthly installments from the date of disbursement; interest was charged and payable on a monthly basis at a rate of 10% per annum.