Ghana agrees with bondholders for $13 billion debt revamp

Ghana has reached a significant milestone in its efforts to overhaul its debt burden.

On Monday, the government announced an agreement in principle with two bondholder groups to restructure around $13 billion of debt.

This deal positions Ghana as the second African nation this month to near the completion of a debt restructuring program.

The agreement represents a concession from bondholders who will forego nearly $4.7 billion of their loans and provide cash flow relief of approximately $4.4 billion until 2026.

This period coincides with the end of Ghana’s current International Monetary Fund (IMF) program.

The formal proposal will be presented to all bondholders in the coming weeks, and its approval would signify Ghana’s emergence from debt default.

Details of the deal suggest a “haircut” – a reduction in the principal owed – of up to 37% for bondholders.

The IMF has hailed the agreement as a crucial step towards Ghana’s economic recovery, and the committee representing its international bondholders echoed this sentiment, viewing it as a pathway for the nation’s financial well-being.

This development follows similar agreements Ghana recently secured with its bilateral creditors and Zambia’s ongoing debt restructuring efforts.

Analysts point to Ghana’s relatively swift progress compared to Zambia, potentially accelerating their economic recovery.

The government intends to ensure “Comparability of Treatment” throughout the restructuring process.

This principle aims to prevent bondholders from receiving excessively favorable terms compared to other creditors.

France and China co-chair the official creditor committee, and they view the recent agreement as a solid foundation for discussions on this principle.

Bondholders will have two options under the proposed restructuring. The first is a “disco bond” offering a 5% interest rate, increasing to 6% after mid-2028, with maturities spread across three instruments maturing between 2026 and 2029.

This option comes with a 37% haircut. The second option is a “par bond” with a maximum value of $1.6 billion and three instruments. The primary instrument will mature in 2037 with a 1.5% coupon and no haircut, except for past-due interest.

The agreement also addresses a separate World Bank-partially guaranteed bond. The government clarified that the multilateral lender will fully repay the guaranteed portion to holders, while the unprotected portion will be treated similarly to the rest of the country’s bonds.

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