[ 2016-09-09 ]

Issuing Eurobond with short term maturity strategic – Terkper
Finance Minister Seth Terkper, has justified the
launch of Ghana’s fifth Eurobond at a high yield
of 9.25 percent with a short maturity date.

Ghana yesterday (September 8, 2016), issued its
fifth Eurobond of 750 million dollars at a yield
of 9.25 percent a few points lower than the last
one which was at 10.75 percent.

The Eurobond however will mature in 5 years; the
shortest period in the history of Eurobond issues
in Ghana.

Also, the principal will be expected to be repaid
in three installments of US$250 million each in
September of 2020, 2021 and 2022.

A number of economists including a former deputy
Governor of the Bank of Ghana and the running mate
of the NPP, Dr. Mahamoud Bawumia, have criticized
the move maintaining that the short period defeats
the country’s medium to long term borrowing
agenda.

“Contrary to government’s stated objectives
that it is borrowing long term, it is now being
forced by the market to borrow short to medium
terms for five years. Ghana, has today [September
8, 2016], issued a bond on the London market for
750 million dollars for a five year tenure at a
price of over nine percent so the spread for the
five year tenure is about 8 percent and which is
so high,” he recounted.

“When we got out of HIPC, we borrowed for ten
years at 8.5% but after being an oil producing and
middle income country, we could only borrow for
five years but now for over 9 percent,” Dr.
Bawumia further asserted.

But Finance Minister, Seth Terkper responding to
the concerns said government borrowing the
Eurobond for the short term maturity period of 5
years is strategic.

“For purposes of long term capital investment,
we will go back to the market and borrow long
term. We are not abandoning our long term
objective, but rather we’re being strategic,”
he stated.

Mr. Terkper added, “If I have to refinance that
bond at 9.5 and I had previously refinanced at
8.125 or 7.925, I do not have to refinance for ten
years knowing that the rates are likely to go
down, so I refinance for five years so we take off
one third each in 2021, 2022 and 2023 by which
time the country’s 2013 bond would have
matured,”

“By which time also the sinking fund would have
accumulated a bit more money and we would continue
with our buy back policy.”

Source - citibsinessnews.com

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