Fitch Assigns ‘CCC+’ Rating to Ghana’s New U.S. Dollar Bonds Following Eurobond Restructuring
Fitch Ratings has assigned a ‘CCC+’ rating to Ghana’s new U.S. dollar bonds following the government’s successful restructuring of its Eurobond debt. The rating agency has also upgraded Ghana’s Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC’, reflecting growing confidence in the country’s domestic credit profile.
However, Ghana’s Long-Term Foreign-Currency (LTFC) IDR remains affirmed at ‘RD’ (Restricted Default) due to its continued default on portions of external commercial debt, pending further restructuring.
Ghana’s Eurobond restructuring, which concluded with 98.58% consent from bondholders, has replaced 15 outstanding Eurobonds, including a partially guaranteed note by the International Development Association (IDA), with five new bonds.
The new debt instruments, issued as part of a broader fiscal consolidation strategy, signal some recovery potential for Ghana, though Fitch refrains from issuing an outlook on sovereigns rated below ‘CCC+’.
Under the restructuring terms, investors had two options: a “disco” option involving a 37% nominal haircut, with bonds maturing in 2029 and 2035, and a “par” option that preserved the principal but pushed maturity out to 2037. The exchange included zero-coupon amortizing notes to address accrued interest.
The restructuring marks a significant reduction in Ghana’s foreign currency debt burden, amounting to around 6% of GDP in 2024. This will also ease debt service payments by $3.5 billion over the 2024-2026 period, relieving some of the immediate fiscal pressure. However, risks remain elevated, with interest payments still consuming a substantial portion of government revenue.
Fitch’s affirmation of Ghana’s ‘RD’ rating on foreign currency debt underscores that the country remains in default on portions of its external debt. The Eurobond covenants include a “most-favored creditor” clause, ensuring that Ghana cannot offer better terms to other creditors without matching them for Eurobond holders.
The upgrade of Ghana’s LTLC IDR to ‘CCC+’ reflects our increased confidence that the likelihood of another default on Ghana’s LC debt is being reduced with the completion of the Eurobond restructuring, as this further unlocks access to concessional international finance.
Meanwhile, Ghana and the IMF have reached a staff-level agreement on the third review of the extended credit facility with the agreement unlocking $360 million in additional funding, further stabilizing Ghana’s finances amid ongoing fiscal consolidation and gradual economic recovery.
