Ghana Flags Losses for Eurobond Holders in Debt Restructure




  • In Business
  • 2022-11-24 18:49:43Z
  • By Bloomberg
 

(Bloomberg) -- Ghana will ask holders of its international bonds to accept losses of as much as 30% on the principal and forgo some interest payments as it hammers out a debt-sustainability plan to qualify for a loan from the International Monetary Fund.

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The West African country will also ask holders of domestic bonds to forfeit some interest payments, Deputy Minister of Finance John Kumah told Accra-based Joy Fm radio. He confirmed the planned restructuring in an interview with Bloomberg.

"These are proposals," Kumah said by phone on Thursday. "We will soon start negotiations with both local and foreign bondholders."

Ghana is negotiating a $3 billion program with the IMF after being shut out of international debt markets amid a selloff of its dollar debt that lifted yields to distressed levels. The cedi is the world's worst-performing currency against the dollar this year, lifting the cost of servicing the debt.

Interest Suspension

In addition to principal cuts, the government is looking to suspend interest payments on foreign bonds for three years. Domestic bond investors would be asked to exchange their existing securities for new securities that may offer a zero coupon in the first year, 5% in the second and 10% in the third year, Kumah said in the broadcast.

The reorganization is intended to help Ghana meet debt sustainability requirements to qualify for the IMF bailout it has been negotiating since September, and possibly reach a staff-level agreement with the Washington-based lender by year-end.

"The foreign debt holders will take their cut," Kumah told Joy Fm. "We we have already set up a committee to start the backstage engagement with our bondholders."

Yields on Ghana's $1.2 billion of 2032 eurobonds declined 56 basis points on Thursday to 30.34%. The premium investors demand to hold the country's dollar bonds rather than US Treasuries was 3,158 basis points, well above the 1,000 level considered distressed.

Fitch Ratings would likely lower the country's long-term issuer default rating to RD, one notch above default, from CC, if debt gets restructured as part of the IMF talks, it told Bloomberg in an interview last month.

That rating is assigned to an issuer that, in Fitch's opinion, "has experienced an uncured payment default or distressed debt exchange" on a bond or loan but hasn't entered into bankruptcy or some other form of administration.

The ratings company downgraded its assessment of Ghana credit in September for the third time this year to four levels below investment grade, from CCC.

(Updates with detail of sovereign debt from sixth paragraph)

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  • homes for sale East Wenatchee
    (2022-11-25 06:09:26Z)

    In a debt restructuring proposal unveiled earlier this month, Ghana flagged potential losses for holders of its Eurobonds. According to the proposal, the country is looking to extend the maturity of its Eurobonds by 5 to 10 years and to reduce the coupon rate on the bonds by 1.5 percentage points. The restructuring proposal has been met with some opposition from Ghanaian lawmakers, who argue that it would be unfair to force bondholders to take losses. However, the country's finance minister has defended the proposal, arguing that it is necessary in order to avoid a debt default.

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