Ghana is on the cusp of a default as the grace period on a $40.6 million coupon due on its dollar bond maturing in 2026 expires at the end of Friday.
(Bloomberg) — Ghana is on the cusp of a default as the grace period on a $40.6 million coupon due on its dollar bond maturing in 2026 expires at the end of Friday.
The coupon was originally due on Jan. 18 and is the first since the West African nation unilaterally suspended payments on most of its external debt in December.
When asked if the government intended to pay, a finance ministry spokesperson sent a copy of the Dec. 19 press release announcing the suspension of payments on eurobonds, declining to comment further.
Ghana has been engaging investors since November to restructure about $30 billion of local and international debt. It recently completed the first part of a domestic restructuring, with investors exchanging 83 billion cedis ($6.7 billion), or 64% of holdings, for new securities, against an overall target of 80%. It aims to start “substantive” discussions with international bondholders and their advisers in coming weeks, Minister of Finance Ken Ofori-Atta said Thursday.
“They are in default,” Kevin Daly, a London-based investment director at abrdn, which is part of the bondholders’ committee. “They said we are going to stop paying coupons on all their bonds, that is part of your restructuring process.”
Africa’s second-biggest gold producer becomes only the fourth Sub-Saharan country to default on an international bond payment, after Zambia, Mozambique and Ivory Coast.
Ghana will commit soon to restructuring talks with eurobond holders, Daly said. As much as $13 billion of dollar bonds are up for reorganization, according to data compiled by Bloomberg. Private creditors may take a haircut of as much as 30% on the principal and be asked to forfeit some interest payments, a deputy finance minister hinted in November. The private lenders should brace for more losses than bilateral creditors, Ofori-Atta said.
Ghana’s overhauling debt to win an International Monetary Fund board approval for a $3 billion extended credit facility program. The nation wants to reduce liabilities from an IMF estimate of 105% of gross domestic product in 2022 to 55% by 2028.
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