Ghana: Restructuring of external debt likely as setup for external bondholders committee possible
A debt restructuring of Ghana’s external debt is likely given the possible setup of an external bondholders committee.
In a recent report by Singapore-based finance and market research firm, REDD Intelligence, there is a push for the country’s external bondholders to meet in the coming weeks.
“There is a push, however, for external bondholders to organise in the next several weeks.
“Two external bondholder committees are likely, holders of the partly World Bank-guaranteed 2030 Eurobond may want to set up a separate group”, the research firm noted.
There have been assertions of government not wanting to restructure its external debts as doing so will result in great difficulty in returning to the international capital markets.
Hence, the only option for government was a domestic debt restructuring possibly in the form of reduction in principal and interests on investments (haircut).
But the President has however, assured Ghanaians that they will be no haircuts on investments as it tries to secure a deal from the IMF.
According to REDD Intelligence, there are four different advisory firms working with government on economic policy and debt management in the context of the sovereign’s talks with the IMF.
It adds that the firms are working with the government on an informal basis as their mandates have not yet been formalized.
The four investment advisory firms it noted are investment bank Lazard, law firm Hogan Lovells, Global Sovereign Advisory and Lion’s Head Global Partners.
Meanwhile, a debt restructuring by Ghana is likely to further result in a credit downgrade by Fitch Ratings.
According to Jan Friederich, Head of EMEA Sovereign Ratings at Fitch, Fitch Ratings would likely lower the country’s long-term issuer default rating to RD from the current CC.
“If a debt restructuring is part of the agreement with the IMF then, in terms of default risk, that will supersede any benefit from the financing support that Ghana might get from the IMF.
“A restructuring would likely lead to the relevant rating being placed in restrictive default,” he stated.
The RD rating is assigned to an issuer that, in Fitch’s opinion, “has experienced an uncured payment default or distressed debt exchange” on a bond or loan but hasn’t entered into bankruptcy.
