Ghana Offers Restructuring Plan for $13 Billion in Bonds, Reports Reuters

By Maxwell Akalaare Adombila

ACCRA – Ghana has invited holders of approximately $13 billion in international bonds to exchange their holdings for new financial instruments, following a preliminary restructuring agreement reached over two months ago with two groups of bondholders.

Bondholders have until September 30 to accept this offer; however, those who respond by an early deadline of September 20 will qualify for a 1% consent fee, as indicated in the government’s regulatory statement.

The West African nation, recognized for its gold and cocoa production, defaulted on a large portion of its $30 billion international debt in 2022. Factors such as the COVID-19 pandemic, the war in Ukraine, and escalating global interest rates led to this financial crisis.

Ghana is restructuring its debt under the G20 Common Framework, a process that has also seen Zambia and Chad emerge with agreements. Ethiopia is anticipated to follow suit, though the framework has faced criticism for its slow and cumbersome nature.

A committee representing Ghana’s international bondholders expressed support for the restructuring proposal. They emphasized the need for ongoing economic reforms to restore Ghana’s access to international financial markets.

Additionally, a regional group representing more than 25% of the bondholders backed the offer, stating they will continue to invest and contribute to the growth of a more dynamic economy.

Bondholders will have the option to exchange their holdings for a “disco” bond, which offers an interest rate starting at 5% and increasing to 6% after mid-2028. These bonds will feature varying maturities ranging from 2026 to 2029, but will come with a 37% writedown of principal.

The alternative is a par bond, with a cap of $1.6 billion and three instruments. The primary instrument will carry a 1.5% coupon and mature in 2037, with no principal haircuts other than a writedown of accrued interest. The offer will remain valid for 21 days.

This agreement will result in bondholders foregoing roughly $4.7 billion of their loans and providing approximately $4.4 billion in cash flow relief until 2026, coinciding with the end of Ghana’s current International Monetary Fund program.

Godfred Bokpin, an economist and finance professor at the University of Ghana, described the announcement as a significant milestone in the country’s restructuring endeavors. He indicated that this development allows investors to better understand their potential losses and enables them to move forward.

The new bonds are set to be issued on October 9. Holders of the Ghana 2030 international bond, which has partial guarantees from the World Bank and is included in the restructuring, are expected to receive their guaranteed payment on the same day or shortly thereafter.