Ghana Offers Bondholders Debt Restructuring

By Maxwell Akalaare Adombila
ACCRA (Reuters) – Ghana has invited holders of approximately $13 billion in international bonds to swap their holdings for new instruments, following a preliminary restructuring agreement with two bondholder groups.

Bondholders have until September 30 to accept this offer, with an early deadline of September 20 that entitles early responders to a 1% consent fee as stated in the government’s regulatory announcement on the London Stock Exchange.

Amidst a debt crisis, Ghana defaulted on the majority of its $30 billion international debt in 2022 due to the financial stresses caused by the COVID-19 pandemic, the war in Ukraine, and rising global interest rates. The country is undertaking a comprehensive debt overhaul under the G20 Common Framework, previously utilized by Zambia and Chad, with Ethiopia anticipated to be next in line. However, this restructuring process has faced criticism for being slow and unwieldy.

In support of the restructuring offer, a committee representing Ghana’s international bondholders highlighted the critical need for Ghana to sustain economic reforms, paving the way to regain access to international financial markets. A regional group representing over 25% of the bondholders also expressed support, emphasizing their commitment to contributing towards a more vigorous economy.

The restructuring proposal includes two options:
1. Disco bond: Offers a 5% interest rate influx increasing to 6% after mid-2028, with maturities spanning from 2026 to 2029, including a 37% principal writedown.
2. Par bond option: Caps at $1.6 billion, with three instruments, the primary yielding a 1.5% coupon maturing in 2037, involving a writedown of past-due interest but no principal haircut.

This exchange offer will remain valid for 21 days. With this restructuring, Ghana expects bondholders to relinquish approximately $4.7 billion of their loans while providing cash flow relief of about $4.4 billion until 2026, when the current IMF program is set to conclude.

According to Godfred Bokpin, an economist at the University of Ghana, the announcement signifies a pivotal point in Ghana’s restructuring journey. He stated, “With this, investors now have a fair understanding of their losses, and they can move on.”
The new bonds are expected to be issued on October 9, aligning with the guarantee payments for the Ghana 2030 international bond, partially backed by the World Bank.