Ghana proposes $13 billion bond restructuring to address economic woes

Ghana has extended an invitation to holders of approximately $13 billion in international bonds to exchange their holdings for new instruments. This offer follows a preliminary restructuring agreement with two bondholder groups. The deadline for the offer is September 30, with an early deadline of September 20 offering a 1% consent fee for early participants.

The West African nation defaulted on most of its $30 billion international debt in 2022, driven by economic pressures including the COVID-19 pandemic, the Ukraine war, and rising global interest rates. Ghana is now restructuring its debt under the G20 Common Framework, a process that has faced criticism for being slow and cumbersome.

Bondholders are presented with two options. The first is a “disco” bond offering interest rates of 5-6% with maturities between 2026-2029, involving a 37% principal writedown. The second is a par bond option capped at $1.6 billion with no haircut except for past due interest. This agreement will result in bondholders forgoing about $4.7 billion of their loans and provide cash flow relief of approximately $4.4 billion until 2026.

The restructuring is viewed as a crucial milestone in Ghana’s efforts to address its economic challenges and eventually regain access to international financial markets. Both international and regional bondholder groups have expressed support for the offer, emphasizing the importance of Ghana sustaining economic reforms.