[ 2016-10-17 ]

Ghana issues maiden dollar bond on local market
The government last week trapped additional
foreign exchange into its vault when it issued a
United States dollar-denominated bond on the local
market to raise a total of $94.64 million at a
coupon rate (interest rate) of six per cent.
The offer attracted a total of 26 bids from
resident investors only with a face value of
$99.64 million. This represents a 5.28 per cent
over subscription and the coupon rate was within
the government’s initial price range of between
5.5 per cent and 6.5 per cent.

It is the first time the government has issued a
foreign currency denominated bond on the domestic
market and analysts believe such as a move is
important to provide a benchmark yield curve for
the market, while making available more foreign
exchange to keep the cedi stable.

“On settlement, this two-year bond becomes one
of our country’s lowest yield bonds aside from
the 2017s which are currently trading at about
5.45 per cent and maturing in less than a year,”
a statement issued by the Ministry of Finance
said.

According to the ministry, proceeds of the bond
would form part of the sinking fund established by
the government to repurchase or redeem specified
debts. The proceeds would therefore be used to buy
back some of the high coupon instruments on the
local and international capital market as part of
the debt (liability) management strategy.

“Going forward, the government will explore the
advantages that this instrument type presents as
an alternative source of funding to finance the
dollar component of future budgets,” the
ministry said.

Debt strategy

The government is pursuing a strategy to
restructure the country’s debt, part of which
includes issuing long tenor debt instruments to
replace shorter term ones. In some instances, the
government buys back some of its bonds which may
be trading at lower coupons.

“The issuance of this bond gives further impetus
to the government’s Medium-Term Debt Management
Strategy, which among others focuses on minimising
and/or replacing expensive shorter dated
instruments with longer dated issuance.”

“It also provides a positive boost to the
development of our domestic debt market by
introducing a new investment instrument for
institutional and individual investors,” the
statement explained.

The government believes the successful issuance of
the bond, evidenced by the generally high
subscription and the favourable pricing, “is a
reflection of the returning confidence in the
Ghanaian economy and further confirms Ghana’s
bright medium-term prospects”.

Ghana’s credit ratings

Recently, international credit rating agencies
have revised Ghana’s ratings favourably.
Moody’s revised the outlook on Ghana’s
Long-Term Bond Ratings from negative to stable and
affirmed the rating at B3.

Moody’s cited significant fiscal deficit
reduction and success in implementing structural
reforms over the past year as well as reduced
government liquidity risk on the external side,
following the issuance of the $750 million
Eurobond, the proceeds of which are earmarked for
debt repayments, as some of the key drivers for
the stabilisation of the rating.

Standard & Poor's also kept Ghana’s rating at
B-, but with a stable outlook, up from the
negative outlook it previously assigned the
country.

Source - Graphiconline

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