Ghana turns to banks for debt restructuring amidst economic crisis

Ghana reaches an agreement with banks to restructure $1.36 billion in locally issued U.S. dollar bonds and cocoa bills.
The country seeks new terms for $11.18 billion of domestic debt to meet the IMF deadline and secure further financial assistance.
Debt restructuring includes the conversion of loans and bills, with lower interest rates and new bond options.

According to three persons familiar with the discussions, Ghana and banks have struck an agreement to restructure 15 billion Ghana cedi ($1.36 billion) in locally issued U.S. dollar bonds and cocoa bills.

To meet an International Monetary Fund (IMF) deadline and concentrate on talks with foreign creditors, the West African country is looking for fresh conditions for the restructuring of its domestic debt by the end of June.

With 85% of eligible bondholders participating in the first phase of Ghana's domestic debt exchange, which was completed in February, the country now needs new terms for another 123 billion Ghana cedi ($11.18 billion) in order to be eligible for the next installment of a $3 billion IMF loan to help it deal with its worst economic crisis in a generation.

The debt includes obligations to the central bank, domestic dollar bonds, cocoa bills, and pension funds. To satisfy the short-term liquidity requirements of the nation's cocoa regulator Cocobod, cocoa bills were created.

Two sources in the finance ministry and one in a bank that owns part of the bonds said that the government and the lenders had reached an agreement to convert two term loans with new, lower interest rates, totaling 6.9 billion Ghana cedis in domestic U.S. dollar bonds.

Even though some banks are hanging out for 13%, another 8.1 billion Ghana Cedis worth of cocoa bills will be transformed into a new bond with a 12% return, according to a banking source. The yield of the final cocoa bill, which was issued in February 2023, was 32.22%.

When contacted for comment, the finance ministry rejected it, while Cocobod and a bank lobbying organization remained silent.

The three people, who are involved in the discussions and who requested anonymity because they are not authorized to speak publicly, stated that the new loans will have a five-year maturity starting in 2025.

Under an IMF rescue agreement signed in May, the nation that exports gold, cocoa, and oil plans to lower its foreign debt interest repayments by $10.5 billion over the next three years. The nation defaulted on the majority of its external debt in December.

A Memorandum of Understanding for the domestic U.S. dollar bonds is now being reviewed by the Securities and Exchange Commission.