Gov’t agrees to reprofile individual bondholders’ maturing bonds into T-Bills; complete payment of coupon arrears
Information reaching norvanreports indicates that, Government and the Coalition of Individual Bondholder Groups (CIBG) composed of members from the Individual Bondholder’s Forum (IBF) and the Individual Bond Holders Association of Ghana (IBHAG), have reached a significant agreement to address the outstanding domestic debt service payments owed by the government to individual bondholders who did not participate in the voluntary Domestic Debt Exchange (DDE) Programme.
Sources at the Ministry indicate that, the Ministry of Finance (MoF) and the CIBG have signed a Memorandum of Understanding (MoU) that outlines key measures to alleviate liquidity challenges of Government and ensure timely payments to bondholders.
The MoU, a result of extensive discussions and technical-level engagements between the CIBG and the Finance Ministry, acknowledges the increased risk of domestic debt service payments faced by the government due to tightening market conditions. Notably, the Government of Ghana suspended payment of external debt service obligations since December 19, 2022, exacerbating the urgency to address outstanding payments to individual bondholders.
Under the agreed terms of the MoU, the Government commits to completing the payment of coupons in arrears, as of May 31, 2023, by June 30, 2023. This step aims to address the immediate financial needs of bondholders who have been awaiting overdue payments. Additionally, the Government undertakes to promptly pay all coupons falling due from June 1, 2023, onwards, providing certainty and reassurance to bondholders regarding future payments.
To manage the maturing bonds effectively, the Government will reprofile them into Treasury Bills (T-Bills) at prevailing interest rates as they fall due. The outstanding maturing bonds will be distributed among 91-Day, 182-Day, and 364-Day T-Bills in a proportionate manner, with 35% allocated to each of the former two and 30% allocated to the latter. This strategy aims to balance risk and returns while offering bondholders a diversified range of investment options.
Crucially, the migration of the outstanding maturing bonds into Treasury Bills will follow the existing mechanics of Government securities issuance. This ensures a seamless transition and eliminates any distinction between the reprofiled Treasury Bills and regular Treasury Bills issued by the Government. By upholding consistent standards and practices, the Government aims to foster investor confidence and maintain the integrity of its financial instruments.
The MoU also emphasizes the collaborative nature of the agreement, highlighting the need for mutual understanding between the Government and the CIBG. Both parties commit to working closely together to resolve outstanding issues, prioritize the immediate cash needs of individual bondholders who did not participate in the DDE Programme, and contribute to the restoration of macroeconomic stability and economic recovery.
In line with this commitment, the Ministry of Finance will issue an offer memorandum that provides detailed information on the terms outlined in the MOU to all individual bondholders who opted out of the DDE Programme. This memorandum will ensure transparency and clarity, enabling bondholders to make informed decisions regarding their financial positions.
The agreement between the Government of Ghana and the Coalition of Individual Bondholder Groups signifies a positive step towards addressing the concerns of bondholders and restoring stability to the country’s economic landscape. By honoring their obligations and proactively engaging with stakeholders, the Government seeks to establish a framework that promotes trust, fosters financial resilience, and facilitates a path to sustainable economic growth.
