Ghana has reached an agreement in principle with two bondholder groups to restructure around $13 billion of its debt, it said on Monday, making it the second African country this month to reach the final stages of a debt overhaul. The agreement will see Ghana’s bondholders forego about $4.7 billion of their loans and provide cash flow relief of about $4.4 billion up until 2026 when the country’s current International Monetary Fund programme ends. “The formal launch of the consent solicitation is expected in the upcoming weeks,” the government said, referring to the process of putting the proposal to all its bondholders which, if passed, would see the country emerge from default. Details of the deal which will amount to a principle ‘haircut’ in bond market speak of as much as 37%, were first reported by Reuters on Thursday.
The IMF described the agreement as “a significant positive step” for Ghana. The committee representing its international bondholders said it would give the country a path to economic recovery. The deal comes hot on the heels of a recent agreement Ghana struck with its bilateral creditors and another slow-in-the-making restructuring in Zambia earlier this month. Theo Acheampong, an analyst at S&P Global Market Intelligence, said the 18 months Ghana’s took “has actually been much faster” than Zambia’s and should help it get back on its feet. The Paris Club of creditor nations, which usually coordinates communications for official creditors, did not respond to a request for comment. But the government said the official creditor committee – which is co-chaired by France and China – saw the agreement as a good basis for consultation on its principle of “Comparability of Treatment” – analysis designed to ensure bondholders aren’t given overly favourable terms.
Those bondholders now have two options. One is a so-called disco bond offering an interest rate of 5% climbing to 6% after mid-2028 and with maturities across three instruments ranging between 2026-2029. It entails a haircut – or write down of ‘principle’ – of 37%. The second is a par bond option capped at $1.6 billion with three instruments, of which the main one will pay a coupon of 1.5% and mature in 2037 with no haircut apart from a write-down of past due interest. A separate bond partially guaranteed by the World Bank will see the multilateral lender fully pay the guaranteed portion to holders, the government said, while the unprotected part would be treated the same as the rest of the country’s bonds. The deal means the IMF board is expected to sign off on the next $360 million tranche of Ghana’s $3 billion support programme when it meets on June 28. The West African gold and cocoa producer defaulted on most of its $30 billion in external debt in 2022, after the COVID-19 pandemic, the war in Ukraine and higher global interest rates exacerbated years of overstretched borrowing.
Ghana started formal talks with its two groups of bondholders in mid-March – one a group of international asset managers and hedge funds and another one including regional African banks. It is resetting its debt under the G20 Common Framework, which has already seen Zambia and also Chad reach agreements. Ethiopia is expected to be next, but the setup has been widely criticised for being slow and cumbersome. Ghana’s bonds slipped following Monday’s confirmation of the agreement but have risen more than 15% since expectations of a deal begin to build in March.
