Ghana agrees restructuring deal with banks on some domestic debt

ACCRA: Ghana has reached an agreement with banks to restructure 15 billion Ghana cedi ($1.36 billion) of locally issued US dollar bonds and cocoa bills, three sources close to the negotiations have told Reuters.

The West African nation is seeking new terms for the restructuring of its domestic debt by the end of June to be able to meet an International Monetary Fund (IMF) deadline, and focus attention on negotiations with external creditors.

Ghana concluded the first phase of its domestic debt exchange in February, with 85% of eligible bondholders participating, but needs new terms for another 123 billion Ghana cedi ($11.18 billion) to qualify for the next tranche of a $3 billion IMF loan to address its worst economic crisis in a generation.

The debt comprises domestic dollar bonds, cocoa bills, pension funds and debt owed the central bank. Cocoa bills are securities issued to meet the short-term liquidity needs of the country’s cocoa regulator Cocobod.

The sources, two in the finance ministry and one at a bank that holds some of the bonds, said the government and the lenders have agreed to convert 6.9 billion Ghana cedi worth of domestic US dollar bonds into two term loans with new lower rates.

Another 8.1 billion Ghana Cedi worth of cocoa bills will be converted into a new bond at 12% yield, although some banks are holding out for 13%, a banking source said.

The last cocoa bill issued in February 2023 had a yield of 32.22%.

The finance ministry declined to comment while Cocobod and a lobby group representing the banks did not respond to requests for comment.

The new loans have a five-year maturity, starting from 2025, the three sources, who are part of the negotiations, said, requesting anonymity because they are not authorised to speak publicly.

The gold-, cocoa- and oil-exporting country, which defaulted on most external debt in December, aims to reduce its external debt interest repayments by $10.5 billion over the next three years under an IMF bailout secured in May.

A memorandum of understanding for the domestic US dollar bonds is with the securities and exchange commission at the moment for approval. “Our target is to conclude it by the end of June,” one of the finance ministry source said.

“They (the banks) understand that they are better off getting a restructuring because we may not be able to pay the coupon,” the other finance ministry source said.