Ghana’s Eurobond Restructuring Deal Implies Bondholder Losses – Moody’s
Moody’s Investor has said that the latest Eurobond restructuring deal by Ghana means huge losses to investors. This include Nigerian banks which have exposure to Ghana’s government Eurobonds through their respective subsidiaries.
Some Nigerian banks booked losses on their exposure to Ghana’s government local debt or investment securities restructuring last year. The debt restructuring hit some lender results and analysts said the Eurobond will have similar effects.
In a commentary note, Moody’s said Ghana’s Ministry of Finance announced an agreement in principle with bondholders’ representatives on the terms for restructuring $13.1 billion of Eurobond debt, which alone account for 21% of 2023 total debt.
Under the agreement, bondholders would forego around $4.7 billion or 5.8% of 2024 GDP in principal, implying losses in line with the Ca rating on Ghana’s foreign-currency bonds.
The agreement would provide debt relief of around $4.4 billion over Ghana’s three-year IMF programme, including unpaid interest on outstanding bonds.
The agreement would offer bondholders the option to replace existing bonds with either par or discount bonds, with a limit of $1.6 billion for the par option.
The par bonds would mature in 2037 and offer an interest rate of 1.5% with no haircut, while the discount bonds would mature between 2029 and 2035 and offer a higher interest rate (5% until mid-2028, then 6%) but a with a 37% nominal haircut.
The agreement comes 18 months after Ghana suspended payments on its external debt and follows the 12 June memorandum of understanding between the Finance Ministry and the Official Creditor Committee (OCC) on a deal to restructure $5.4 billion of official sector external debt.
Conducted under the G-20 Common Framework, the restructuring deal adheres to certain stipulations, including comparable treatment for official and private-sector creditors and a mandate to deliver adequate debt relief as assessed by the IMF.
Although the IMF has already indicated that the agreement will provide enough relief to comply with the parameters of its three-year programme in Ghana, the OCC still has to confirm the treatment of bondholders as comparable to its own.
Bondholders’ consent on the proposed restructuring terms, which will also hinge on their judgment of their debt treatment versus the official sector, is likely to be solicited in the coming weeks.
Under the agreement, the Eurobond partially guaranteed by the World Bank would benefit from loss mitigation, pending formal World Bank approval.
Moody’s said the benefit bondholders receive is consistent with the bond’s Caa3 rating, which is one notch higher than the senior unsecured foreign currency rating.
It noted that the agreement does not contain any state contingent triggers – unlike Zambia’s recent debt restructuring agreement – providing a more predictable repayment profile for the government of Ghana.
Similarly to Zambia’s deal, however, the agreement contains a most favoured creditor clause stipulating that the rest of the debts to other private creditors are treated on par with Eurobond holders, and a loss reinstatement provision.#Ghana’s Eurobond Restructuring Deal Implies Bondholder Losses – Moody’s Money Market Rates Climb on Liquidity Pressure
