Finance Minister urges bondholders to accept terms reached in restructuring $13.1bn debt

The Finance Minister Dr. Mohammed Amin Adam has asked bondholders to accept the terms reached on restructuring some $13.1 billion owed Eurobond holders.

According to him, Ghana will launch the consent solicitation in the coming weeks to implement the “agreement in principle reached for restructuring the $13.1 billion Eurobond debts”.

He disclosed this at the 11th Edition of Paris Forum which was held on the theme “For Successful Debt Treatment for Future Investment Summit” in France.“We remain committed to engaging and resolving our non-bonded commercial indebtedness”, Dr. Amin Adam said.

Background

The committee of holders of Ghana’s Eurobonds on Monday June 24, 2024 announced that it has reached an agreement in principle with the government of Ghana on a restructuring of the Eurobond debts.

The Bondholders also agreed with government on some measures that will help provide significant cash flow and debt stock relief to support Ghana’s economic recovery in the context of the IMF-financed programme.

This comes after a similar deal was struck with bilateral creditors through the official creditor committee earlier this month on restructuring some $5.1 billion.

The agreement in principle term sheet revealed that the Bondholders could get a 37 percent “haircut” on their bonds.

Government is also proposing two options for the investors.

Holders having the right to choose  between the PAR and DISCO option, will have up to a limit of US$1,600m for the PAR option.

In case a consenting holder chooses the DISCO option, such consenting holder would receive 3 new instruments (Bond Short, Bond Long and Down Payment Bond). Otherwise, such consenting holder would receive a Par Bond.

Establishing sinking Fund to build needed buffers

The Finance Minister also revealed in the meeting that “Ghana is, therefore, considering options for building buffers through a sinking fund to increase our debt service capacity in future”.

“We understand that sinking funds should not be debt carrying funds but should use the other routes such as in the case of Ghana”, he added.

Details on how sinking fund will be structured

The Finance Minister at the meeting revealed that the sinking Fund could look at how excess over the cap on the Stabilization Fund from petroleum revenues.

• Improvement in the financial management of SOEs and rechanneling dividends into the Fund.
• Budgetary allocation through increased revenue mobilization

Dr. Amin Adam noted that “Moving forward, securing financing solutions will be crucial to sustaining economic growth while maintaining fiscal stability”.

Restoring Investor Confidence post bondholders deal

The Finance Minister expressed government’s commitment to fiscal discipline and structural reforms, which he believes are key to re-establishing trust with creditors.

“Ghana also remains committed to implementing other measures to that will lead to maintaining credibility in these debt restructuring efforts”, he added.

The Finance Minister used the opportunity to also thank the bilateral and multilateral partners that had provided the financial assistance and facilitated the restructuring process.

The Finance Minister added   that “While Ghana achieved a comprehensive restructuring of its debt in record time, there are too many costly delays suffered by both debtor countries as well as creditors”

Ghana’s economy post deal with bondholders

The Finance Minister was of the view that finalizing this deal “present fresh start positions Ghana as an attractive destination for foreign direct investment”

This he says “this development presents can yield mutually beneficial outcomes for both Ghana and our international partners, fostering sustainable economic growth and development”.

The Finance minister was also of the view that this landmark deal, with the bondholders “   demonstrates the confidence in our country’s leadership and administration’s ability to steer economic recovery, marking the first instance in recent memory where a debt restructuring has been both requested and concluded by the same administration”