Ghana reaches debt restructuring agreement with its $13 billion Eurobond holders

Ghana has reached an agreement in principle with its bondholders to restructure its $13 billion Eurobonds.

According to sources who spoke with Reuters, bondholders will face up to a 37% haircut on principal, alongside an extension of the bonds’ maturity.

This agreement follows the country’s recent finalized deal with the official creditor committee, formalizing a debt restructuring deal initially agreed upon in January 2024. The debt restructuring agreements are paving the way for the country to receive a new funding tranche from the International Monetary Fund.

The details of the agreement set the stage for the IMF executive board’s approval of a second review of Ghana’s $3 billion loan package, facilitating the release of the next $360 million tranche.

Ghana’s debt restructuring efforts

In 2022, Ghana faced an economic crisis, as the country buckled under the weight of its burgeoning debts and declining revenue. Hence, the country kickstarted the process of obtaining a credit facility from the IMF.

As part of the agreement for the $3 billion credit facility sought from the IMF, the country had to enter into a debt restructuring agreement. It started with its local currency bondholders, with the country curating a domestic debt exchange programme.

The domestic debt exchange programme carried out by the Ghanaian authorities in December 2022 led to significant haircuts for the domestic bondholders. For Nigerian banks, it also affected their income statements, as they incurred about N284 billion losses due to the Ghanaian bonds restructuring.

The first step taken by the Ghanaian government in restructuring its debt, helped it receive the first tranche of $600 million from IMF’s $3 billion credit facility.

Since January 2024, discussions for the second tranche have been ongoing, culminating in the country reaching an agreement in principle with the Official Creditor Committee (OCC) to restructure its $5.4 billion loan.

The official creditor committee represents the country’s bilateral lenders and is chaired by China and France. In June 2024, the Ghanaian government was able to finalize a deal with the OCC, inching a step closer towards receiving the IMF’s executive board approval for the second tranche of $360 million.

The deal with the OCC was reached under the G20 Common Framework for Debt Treatment.

After restructuring its local debts (domestic bonds), bilateral loans, the next set of loans to be restructured are the foreign-denominated commercial debts (Eurobonds).

According to a report by Reuters, Ghana is targeting a debt relief of up to $10.5 billion between 2023 and 2026. This debt relief is essential for the country to reduce its public debt-to-GDP ratio from 88.1% at the end of 2022 to 55% by 2028, which is one of the terms for the IMF credit facility.

Impact on Nigerian holders of Ghana’s Eurobonds

In December 2023, the Ghanaian Minister of Finance announced that there will be no haircuts on the principals for domestic bondholders. However, it is estimated that the losses incurred by the bondholders was about 106.64 billion Ghana Cedis (~ $7 billion).

Nigerian banks were significant partakers in the losses incurred, as they recorded almost a $1 billion in losses due to the restructuring. It is yet unknown how much these Nigerian banks hold in Ghanaian Eurobonds. However, with a proposed 37% haircut on principal, there’s a higher probability of increased losses, due to the devaluation of the Naira from January 2023 till date.

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