Ghana has failed to strike a deal with two bondholder groups to restructure $13 billion of international bonds, the government said on Monday, dealing a blow to its efforts to swiftly emerge from default and economic crisis.
Talks were derailed for now amid indications from the International Monetary Fund (IMF) that the deal would not fit its debt sustainability parameters, which set out how much debt it thinks a country can afford, the government said in a statement.
Ghana had been in formal talks with two groups holding its international bonds since March 16 – one “international” group of Western asset managers and hedge funds and another one including regional African banks.
The regional African bondholder group had also rejected part of the proposed rework, including a “PAR option” to retain the original value of the bonds with a longer maturity and lower coupon.
In December 2022, Ghana, the world’s second-biggest cocoa producer, defaulted on most of its external debt of $30 billion, after debt costs and inflation surged when it was locked out of international markets.
“The Government is actively working on solutions that it believes would be consistent with IMF program parameters under the set of policies currently being discussed, with the objective of reaching a mutual agreement acceptable to all parties,” the government said in the regulatory statement.
‘AT SOME POINT’
Ghana – together with Zambia and Ethiopia – is reworking debt under the G20 Common Framework, a process set up during the COVID-19 pandemic to speed up debt overhauls.
However, progress has been slow.
Zambia struggled to get its bond restructuring deal over the line amid objections from official creditors, though it eventually reached agreement in principle in late March.
Ghana is “confident… at some point” it will reach an agreement with bondholders, Finance Minister Mohammed Amin Adam told a press conference on Saturday, without giving a timeline.
The IMF’s Ghana mission chief Stephane Roudet told the joint news briefing, held to coincide with the end of the IMF’s second review of its $3 billion loan programme with Ghana, that the fund needed to continue to see progress in talks with bondholders.
Ghana is aiming to cut $10.5 billion from its external debt repayments and interest costs due from 2023 to 2026. It reached an agreement in principle in January to rework $5.4 billion of loans with official creditors, which will need to confirm that the bondholder deal is comparable to what they offered.
The bondholder deal that had been proposed would have included a heavily discounted option of three bonds maturing between 2030 and 2038 with coupons of 5% until 2027 and 6.5% after. Another “PAR option” offering no principal reduction would have matured in 2043, with a 1.5% coupon.
Bondholders who signed up for either option would have also received a separate bond representing accrued “Past Due Interest”. This bond and the discounted options would have had a nominal, face value haircut of 33%.
Some bondholders had favoured the use of so-called state-contingent debt instruments, which could increase payouts if Ghana’s economy performs better on agreed metrics, as a way of bridging differences in their outlook.
Bondholders had also pushed for a number of extra conditions to be included – such as a “loss reinstatement clause” that reverts the new bonds back to original values in case of another default and provisions to limit the right of the government to legally challenge the deal.
A representative for the international bondholder group did not immediately respond to a request for comment. A representative for the regional group could not immediately be reached.