Ghana has officially invited holders of nearly $13bn in international bonds to participate in a debt swap as part of its ongoing restructuring efforts. The announcement, made on Thursday, follows months of negotiations and comes after a preliminary agreement with two bondholder groups.
Bondholders have until September 30 to accept the offer, though those who opt in before the early deadline of September 20 will receive a 1 percent consent fee, according to the government’s ‘exchange offer and consent solicitation’ published on the London Stock Exchange.
This move is part of Ghana’s broader efforts to restructure its $30bn international debt, most of which it defaulted on in 2022 due to economic pressures caused by the Covid-19 pandemic, the war in Ukraine, and rising global interest rates. The country is undergoing this restructuring under the G20 Common Framework, a process that has also been used by countries like Zambia and Chad. However, the framework has faced criticism for being slow and inefficient.
A committee representing Ghana’s international bondholders has expressed support for the restructuring deal, emphasising the importance of Ghana continuing its economic reforms to eventually regain access to international financial markets.
As part of the restructuring, bondholders will have two options for the debt swap. The first option, known as the ‘disco’ bond, offers an interest rate of 5 percent, rising to 6 percent after mid-2028, with maturities ranging from 2026 to 2029. This option will come with a 37 percent reduction in the principal amount.
The second option is a ‘par bond,’ capped at $1.6bn, which will offer a coupon of 1.5 percent and mature in 2037. This bond option will not involve a haircut on the principal but will include a write-down on past-due interest payments.
The debt swap is expected to provide significant relief for Ghana, allowing the country to reduce its debt burden by $4.7bn and free up $4.4bn in cash flow until 2026, when its current IMF programme concludes.
Godfred Bokpin, an economist and finance professor at the University of Ghana, praised the announcement as a key milestone in Ghana’s debt restructuring efforts. ‘With this, investors now have a fair understanding of their losses and they can move on,’ he told Reuters.
The new bonds will be issued on October 9, with holders of the 2030 Ghana international bond, partially guaranteed by the World Bank, receiving their guarantee payment on the same day or shortly thereafter.
Ghana’s efforts to overhaul its debt and regain economic stability are being closely watched by other nations undergoing similar restructuring processes, with Ethiopia expected to be next in line for negotiations under the G20 Common Framework.
Credit: Reuters
