"Debt Restructuring: Banks plan for $427m losses"

" Debt Restructuring: Banks plan for $427m losses \r\n\r\nGhana\u2019s move to restructure its local-currency and overseas debt is weighing on banks from Africa to the UK.\r\n\r\nFour of Africa\u2019s biggest lenders \u2014 Standard Bank Group Ltd., FirstRand Ltd., Absa Group Ltd., and Nedbank Group Ltd. \u2014 collectively set aside 4.87 billion rand ($267 million) to account for the losses, impairing as much as 57% of local and onshore dollar denominated debt holdings. Meanwhile, Standard Chartered Plc set aside $160 million.\r\n\r\nA rare move to restructure local debt \u2014 bondholders exchanged 87.8 billion cedis ($7.1 billion) of notes that paid an average of 19%, with bonds returning as little as 8.35% \u2014 have resulted in losses for financial institutions. Ghana is restructuring most of its public debt, estimated at 576 billion cedis, to finalize a $3 billion bailout from the International Monetary Fund.\r\n\r\n\u201cWe dealt with the risk, because as we see it, while there\u2019s a potential for a better outcome, there\u2019s also potential for a worse outcome,\u201d Absa Chief Financial Officer Jason Quinn said in an interview. \u201cSo that\u2019s why we took a position to impair those extensively.\u201d\r\n\r\nAbsa\u2019s unit in Ghana, its third-largest lender by assets, booked 2.7 billion rand as impairment, including 2.2 billion rand for sovereign bonds, and another 500 million rand to cater for other government-related exposures. The lender maintains that its unit remains well capitalized.\r\n\r\nStandard Bank, which runs the fourth-biggest lender in Ghana by assets, said it\u2019s ready to re-capitalize the business should they need to, even though the Ghanaian unit\u2019s balance sheet is a \u201cfortress.\u201d The lender holds as much as 2.6 billion rand in Ghanaian bonds.\r\n\r\n\u201cIt is unfortunate where they find themselves,\u201d FirstRand CEO Alan Pullinger said in an interview earlier this month. \u201cThe debt sustainability just wasn\u2019t there and when you are over-geared, you eventually run out of cash and you have to call a default.\u201d\r\n\r\nPresident Nana Akufo-Addo\u2019s government plans to start \u201csubstantive\u201d discussions with international bondholders and their advisers in coming weeks, Finance Minister Ken Ofori-Atta said on Feb. 16. The nation targets cutting its liabilities from an estimated 105% of gross domestic product in 2022 to 55% by 2028.\r\n\r\nThe costs to local lenders will only be known later given the stock exchange allowed them to delay releasing financials."

"Debt Restructuring: Banks plan for $427m losses"

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