Ghana, bondholders kick off formal talks on $13bn debt restructuring

Ghana’s international bondholders entered into non-disclosure agreements (NDAs) with the government on Wednesday, three sources told Reuters, a step that marks the start of formal talks to restructure over $13 billion of international bonds. The West African country is seeking debt relief after defaulting on most of its external debt in December 2022 as the world’s second-largest cocoa producer grappled with its worst economic crisis in a generation. The government sent a formal debt rework proposal to the steering committee of a creditor group, said two of the sources with direct knowledge of the talks, speaking on condition of anonymity because the discussions are private. The sources did not provide any further details on the proposal. The move comes after Mohammed Admin Adam  was appointed new finance minister in February.

The NDAs will temporarily restrict Ghana’s largest bondholders from trading the notes in exchange for non-public information for at least two weeks, one source added. BlackRock, Amundi, Greylock and Abrdn are part of the creditor group of overseas investors. Ghana’s finance ministry did not immediately respond to a request for comment. The world’s second-largest cocoa producer was aiming for a simple debt restructuring to exchange old bonds for new notes. During meeting with investors in January, the government shared its intention to exclude any so-called state-contingent debt instruments, fixed income structures that could increase payouts if an economy performs better-than-expected. However, some bondholders push for the use of such instruments, as a way of bridging differences between how they expect a country’s economy to perform and general baseline assumptions some deem as too pessimistic.

The country aims to cut $10.5 billion from its external debt repayments and interest costs that were due from 2023 to 2026 amid an International Monetary Fund $3 billion reform programme. Ghana is aiming to restructure $20 billion out of total external debt that was about $30 billion at the end of 2022, according to a government presentation to investors. The country reached an agreement in principle in January to rework $5.4 billion of loans with official creditors under the Common Framework, a platform set up during the COVID-19 pandemic by the Group of 20 economies. The latest talks are part of a back and forth between Ghana and its international bondholders over the past six months. In an investor presentation in October, the government said it aimed for a haircut of 30 per cent to 40 per cent, sending its bonds sharply lower at the time.

Ghana has 15 international dollar bonds, known as Eurobonds, with maturity dates from 2023 to 2061. The bonds rose in price after Reuters’ initial story on the start of talks, with the 2027 maturity climbing as much as 0.9 cents on the dollar to 47.6 cents, its highest level since September 2022, three months before the country defaulted. That price still indicates deep debt distress, however, with most of the bonds trading at 46 to 48 cents on the dollar, according to Tradeweb data.