Ghana faces downgrade over failure to honour coupon payments on LTLC bonds due this August
Fitch Ratings has issued a stern warning to Ghana, indicating the possibility of a downgrade should the nation fail to meet its first coupon payments on Long Term Local Currency (LTLC) bonds, scheduled for August 2023.
“The issue-ratings on denominated bonds issued on the completion date of the domestic debt exchange would be downgraded in the event of increased risk that Ghana fails to honour the first coupon payments on these bonds due in August 2023,” Fitch Ratings stated in no uncertain terms.
However, the agency has also offered a glimmer of hope for Ghana’s financial standing, provided it addresses two crucial aspects. Fitch has laid out specific conditions under which it would assign a positive rating to the country, a much-needed boost for investor confidence.
First, Ghana must successfully normalize relations with a substantial majority of non-tendered securities bondholders, fostering trust and collaboration with key stakeholders in the financial landscape. Second, is the completion of the restructuring of local-currency bonds held by pension funds.
Crucially, Fitch’s Long Term Local Currency Issuer Default Rating (LTLC IDR) for Ghana will be subject to a forward-looking evaluation, centered on the country’s capacity and willingness to fulfill its local-currency debt obligations, once these critical conditions are met.
Moreover, Ghana’s prospects for a Long-Term Foreign-Currency Issuer Default Rating (LTFC IDR) are contingent upon the nation reaching a successful agreement with private creditors concerning the restructuring of its foreign-currency-denominated debt.
Following this, the completion of the restructuring process in alignment with the Common Framework official creditors’ claims treatment will be closely scrutinized by Fitch to assess Ghana’s intent and capability to honor its foreign-currency debt.
Ghana’s sovereign debt is currently rated as “Restrive Default” by Fitch Ratings.
As the global financial community observes Ghana’s debt management strategies with heightened scrutiny, the country’s authorities must exercise utmost prudence and diligence in navigating these challenges.
The looming coupon payment deadline in August 2023 adds further urgency to the situation, urging swift and decisive actions to avoid adverse credit implications.
Investors and financial observers alike are keenly observing Ghana’s progress on the prescribed path to secure a positive rating outcome from Fitch. The ramifications of any missteps or non-compliance could have far-reaching consequences on Ghana’s access to international capital markets and its broader economic trajectory.
