Ghana dollar bonds fall as investors resist debt overhaul plans

On Tuesday, Ghana’s sovereign dollar bonds recorded a steep drop after the government proposed a 30-40 percent haircut on principal investments to bondholders.

A haircut in business terms is a financial or investment loss incurred by an investor or creditor after an asset offered as collateral for a loan is priced below the actual market value.

After Ghanaian authorities presented the debt restructuring scenario to bond investors on Tuesday, some bonds fell to their lowest level in three months.

The 2061 bond issue was down as much as 2.9 cents in the dollar to 38.9 cents.

This is according to a Reuters report, which said bonds later recovered some ground — but they were still down between 1.5 cents and 2.2 cents in the dollar.

The decline came at a period when Ghana is struggling with spiralling domestic debt costs, which the report said has forced Ghanaian authorities to hold debt restructuring talks with bilateral and commercial creditors.

The report said the Ghanaian government aims to restructure $20 billion out of total external debt which was about $30 billion at the end of 2022.

Bonds with a coupon of no more than 5 percent and a final maturity of not more than 20 years would also be issued, according to Ken Ofori-Atta, Ghana’s finance minister.

Ofori-Atta told investors that the proposed bonds were part of the debt rework for its $13 billion outstanding international bonds.

“We are now intensifying efforts with international bondholders and we expect significant progress in the coming week,” he said.

“As a nation, we also want to show the country’s commitment to burden-sharing in debt restructuring.”

Ofori-Atta said he hoped to conclude discussions before the end of the year.