[ 2021-03-15 ]

Ghana prepares to issue $5 billion Eurobond
As expected, Ghana will this week begin the final
process to raise up to US$5 billion from the
international capital markets in the form of
Eurobonds.


Finance Minister Ken Ofori-Atta – who is
currently receiving medical attention in the
United States over COVID 19 related complications
– had announced government’s intention in
October 2020 to issue a record high volume of
Eurobonds early this year, indicating that the
issuance could happen before the end of the first
quarter as it seeks to close its 2021 budget
financing gap.

The revelation by a top Finance Ministry official
to Bloomberg last week that it will commence a
roadshow to market the impending issuance suggests
that this time table is still being adhered to.



Interestingly, the Ministry claims it will be
marketing US$5 billion in Eurobonds, which is the
upper limit of the range of between US$3.5 billion
and US$5 billion announced last year.

At that time the Ministry said the actual amount
would depend on market conditions at the time of
issuance and even now government reserves the
right to lower the amount it will issue below the
maximum announced.


This is because only about US$2 billion is meant
for financing the 2021 budget deficit, now
expected to be about 9.5 percent of Gross Domestic
Product, down from 11.7 percent in 2020. The rest
is for ‘liability management’ which means
restructuring of the public debt. If Ghana can
secure investors for the impending bond issuance
at coupon rates lower than some of its already
issued bonds it would use proceeds from the latest
issuance to buy them off.

This is a most likely prospect; the highest priced
Ghana Eurobonds were issued at an expensive 10.25
percent and it also has billions of dollars worth
of cedi denominated bonds in issuance with coupon
rates of over 19 percent – those high rates
meant to comfort foreign investors against the
possibility of foreign exchange losses due to cedi
depreciation.



With the cedi having been relatively stable over
the past year and strong indications that this
stability will continue over the medium term,
Ghana can now afford to reduce the cost of its
cedi denominated medium term bond debt.

On the upside, the successful recent issuance of
Eurobonds by Cote d’Ivoire in December 2020 –
the first issuance by a sub Saharan African
country since COVID 19 erupted across the
continent early last year – suggests that a new
issuance by Ghana, which is traditionally one of
the favourite sovereign bond issuers among
international bond investors, will be well
received.

On the downside though, Ghana’s exceeding the
generally accepted public debt to GDP ratio of 70
percent (Ghana’s ratio by the end of the year is
estimated at about 76 percent) will make investors
wary and could persuade them to demand
significantly higher coupon rates than has been
the case over the past few years. If that happens
Ghana may decide not to issue the full US$5
billion even if the demand is there.

For the first time, Ghana’s roadshow to market
the issuance would be held virtually due to
coronavirus restrictions, said the officials, who
declined to be named because they are not
authorized to speak publicly on the matter.



This would be the first time Ghana will hold
virtual meetings with investors prior to an
international debt sale. .

Ghana intends to raise foreign financing this
year through Eurobonds, diaspora bonds,
sustainable bonds as well as syndicated/bridge
loans, the ministry says, although the bulk is
expected to come through Eurobonds.

Ghana has mandated Bank of America, Citigroup
Inc., Rand Merchant Bank Ltd., Standard Chartered
Plc, and Standard Bank Group as lead managers for
the programme. It has also named Accra-based Cal
Bank Plc, Fidelity Bank Ltd., IC Securities Ltd.,
Databank Group, and as co-arrangers, the official
said.

Source - goldstreetnewspaper

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