Local-currency debt rating upgraded by S&P after debt exchange success
Ghana’s local-currency debt rating has been upgraded by S&P Global Ratings following the successful conclusion of the country’s domestic debt exchange with bondholders. However, the nation’s foreign debt remains in default.
S&P raised Ghana’s local credit score from SD (selective default) to CCC+ after new domestic debt securities were delivered to creditors, according to a statement issued on Friday. While the West African nation’s foreign-currency debt remains at SD, the government is currently working on restructuring the external bonds. Analysts Frank Gill and Ravi Bhatia said in a note that they “understand that the authorities aim to lower debt to GDP to about 55% over a five-year horizon.” They added that discussions with holders of foreign currency instruments are continuing.
Ghana has been in talks with investors since late 2021 to restructure roughly $30bn of its $46bn in local and international debt. It has already completed the first part of a domestic restructuring, with investors exchanging 83 billion cedis ($6.7bn), or 64% of holdings, for new securities, against an overall target of 80%. The country now aims to begin “substantive” discussions with international bondholders and their advisers in the coming weeks, according to Minister of Finance Ken Ofori-Atta.
However, the ongoing discussions have resulted in halted payments on individual bonds. S&P lowered the ratings on three UK-law eurobonds to D, or default, on Friday. These bonds, which are maturing in 2023, 2027, and 2025, have been affected due to the discussions with bondholders.
Last week, Fitch Ratings cut Ghana’s local-currency credit score to default, as well as downgraded its foreign-currency debt rating to partial default after the country missed a Eurobond payment. A panel of dealers and investors also reviewed whether a missed payment of a coupon on one of Ghana’s dollar bonds due in 2026 constituted a credit event that could trigger the payout of insurance protection on the debt.
While Ghana continues to work towards resolving its debt issues, it remains a challenging time for the country’s economy. Its debt-to-GDP ratio is currently around 80%, one of the highest in sub-Saharan Africa, and the ongoing Covid-19 pandemic has further impacted its economy. The government has been implementing various measures to address these challenges, such as its recent efforts to increase domestic revenue and reduce expenditure.
Investors will be watching closely as Ghana continues to navigate its debt restructuring, with the hope that the country can successfully address its challenges and improve its economic outlook.
