Ghana Reaches Preliminary Agreement with Bondholders on $13 Billion Debt Restructuring

Ghana has reached a preliminary agreement with two groups of bondholders to restructure approximately $13 billion in international debt, the government announced on Monday. This landmark deal, which involves a potential 37% reduction in debt value, marks significant progress in Ghana’s multi-year effort to overhaul its debt.

Under the terms of the agreement, bondholders will forfeit around $4.7 billion of their claims and provide approximately $4.4 billion in cash flow relief during Ghana’s current loan program with the International Monetary Fund (IMF), set to conclude in 2026.

“The formal launch of the consent solicitation is expected in the upcoming weeks,” the government stated, referring to the process where the restructuring proposal will be presented to all bondholders for approval. This step is crucial for Ghana to emerge from its current default status.

The international bondholders’ committee expressed support for the deal, highlighting its potential to foster economic recovery in Ghana through substantial debt relief and improved cash flow. “The debt restructuring, which has become one of Ghana’s biggest problems in the past two, three years, we are bringing (it) to an end,” Finance Minister Amin Adam declared during a recent meeting with the Ghanaian diaspora in the UK.

Theo Acheampong, principal analyst at S&P Global Market Intelligence, also welcomed the announcement, noting its swift progression compared to other countries like Zambia. Acheampong emphasized that the restructuring would help reduce public debt and free up resources for critical growth areas such as agriculture and infrastructure projects.

The proposal offers bondholders two choices. The first is a “disco bond” with an interest rate starting at 5% and increasing to 6% after mid-2028. These bonds have maturities ranging from 2026 to 2029 and involve a 37% principal reduction. The second option is a par bond, capped at $1.6 billion, which features a 1.5% coupon rate and matures in 2037, with no principal reduction except for a write-down on past-due interest.

Additionally, a partially World Bank-guaranteed bond will see the multilateral lender make a cash payment to holders shortly after the restructuring, with remaining claims treated similarly to other bonds.

This agreement follows closely on the heels of another significant deal with Ghana’s bilateral creditors, which cleared the way for the IMF’s executive board to approve a $360 million disbursement after the second review of Ghana’s $3 billion program.

The government indicated that the IMF has confirmed the proposal aligns with the parameters of its loan program. Ghana’s official creditor committee, co-chaired by France and China, views the agreement as a solid foundation for consultations regarding compliance with the “Comparability of Treatment” principle. This principle ensures that official creditors do not make disproportionately large concessions compared to non-members and private lenders.

The IMF board is scheduled to review the proposal on June 28. Ghana, a major gold and cocoa producer in West Africa, defaulted on most of its $30 billion external debt in 2022. The economic challenges were exacerbated by the COVID-19 pandemic, the war in Ukraine, and rising global interest rates.

Ghana initiated formal talks with two groups of bondholders in mid-March: one comprising Western asset managers and hedge funds, and another consisting of regional African banks. This debt restructuring is being conducted under the G20 Common Framework, which aims to provide swift debt relief to some of the world’s poorest countries. However, the framework has faced criticism for being slow and cumbersome.

In response to the announcement, Ghana’s bonds slipped, with shorter-dated maturities down more than 0.6 cents, and most of the curve trading between 51-53.5 cents on the dollar, according to Tradeweb data.

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