Fitch affirms Ghana at ‘Restrictive Default’; Ghana still defaulting on its outstanding Eurobonds
Rating agency, Fitch, has affirmed Ghana’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) at ‘RD’ and Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) at ‘CCC’.
It typically does not assign Outlooks to sovereigns with a rating of ‘CCC+’ or below.
The affirmation of the LTFC IDR at ‘RD’ reflects that Ghana is still defaulting on its outstanding Eurobonds following the expiration of the grace period for a missed coupon payment in February 2023. The rating agency however said Ghana has since made progress in its Common Framework restructuring process.
“An agreement on the main terms of the official bilateral debt treatment with the official creditor committee was reached in January 2024 and the memorandum of understanding that formalises these terms as well as non-financial terms, was finalised in June 2024”, it stated.
External debt restructuring to be completed by end-year
In June 2024, Ghana and representatives of bondholders who own or control approximately 40% of the outstanding US$3 billion Eurobonds, reached an agreement in principle (AIP) on the terms of the Eurobonds restructuring.
This AIP met both the International Monetary Fund’s (IMF’s) debt sustainability thresholds and the Common Framework’s comparability of treatment clause. An AIP was previously reached in January 2024 but subsequently rejected by the IMF as it did not comply with its debt sustainability thresholds.
“We expect the consent solicitation to be launched imminently, and the Eurobond exchange to be settled by September 2024, although there could still be some delays due to ongoing negotiations on the restructuring terms of the International Development Association (IDA)-partially guaranteed bond. Ghana’s FC non-bond commercial debt would still need to be restructured on comparable terms. We expect completion of the external debt restructuring by end-2024”, it explained.
Significant reduction in terms
In exchange for the 15 outstanding Eurobonds, investors will be offered a set of new bonds, with two options.
Under the ‘disco’ option, a nominal haircut of 37% will be implemented on all claims, including past due interests (PDIs), and the remaining claims restructured into bonds maturing from 2026 to 2035 with coupon rates ranging from 0% to 6%.