ACCRA, Monday, 5th December, 2022 … The Republic of Ghana (the "Republic" or “Ghana”) announced today that it is inviting Eligible Holders (as defined below) to exchange (the “Invitation”) approximately GHS137.3 billion of the domestic notes and bonds of the Republic, E.S.L.A. Plc and Daakye Trust Plc specified in Table A below (the “Eligible Bonds”) for a package of New Bonds (as defined below) to be issued by the Republic. The terms and conditions of the Invitation are described in the exchange memorandum dated today (the "Exchange Memorandum") and available at https://projects.morrowsodali.com/ghanadde (the “Invitation Website”).
Ghana is facing a very challenging economic situation amid an increasingly difficult global economic environment, marked by the COVID-19 pandemic, the global economic shock created by the Russian invasion of Ukraine, and disruptions of global supply chains. These adverse developments have exposed Ghana to a surge in inflation, a large exchange rate depreciation and have increased stress on the fiscal situation.
To address the ongoing economic crisis, Ghana has requested financial assistance from the International Monetary Fund (“IMF”). The Government expects to reach a Staff-Level Agreement (SLA) soon on an IMF programme aiming at restoring macroeconomic stability and debt sustainability while preserving financial stability, and protecting the most vulnerable. To this end, the Government is determined to implement wide-ranging structural and fiscal reforms to kick-start growth and restore fiscal and debt sustainability.
The latest debt sustainability analysis has demonstrated that Ghana is faced with a significant financing gap over the coming years and that its public debt is unsustainable. To alleviate the debt burden in the most transparent, efficient, and expedited manner, a treatment of domestic debt is necessary. In particular, the Invitation does not entail any reduction in the principal amount (“haircut”) of the Eligible Bonds. It involves an exchange for new Government of Ghana bonds with a 0% coupon in 2023 that steps up to 5% in 2024, and 10% from 2025 onwards, as described in more detail below.
This domestic debt exchange is part of a more comprehensive agenda to restore debt and fiscal sustainability. External debt restructuring parameters will be negotiated in due course.
The successful completion of this domestic debt exchange is a critical component of both the debt reduction programme and the IMF programme discussions; it will contribute to unlocking the support of the international community and will allow Ghana to achieve its debt targets. As such, the Government calls for the full participation of all holders of Eligible Bonds.
The Government expects overwhelming support for this exchange. The alternative would be a far worse economic crisis, with protracted closure from international markets (including imported goods and services) and further domestic economic instability both for the real economy and the financial sector. It would also mean depleted fiscal resources to support the vulnerable.
Summary of the Invitation
The Invitation is available only to registered holders of Eligible Bonds (i) that are not Individual Investors (as defined below) or (ii) that are otherwise authorised by the Government of Ghana, in its sole discretion, to participate in the Invitation (“Eligible Holders”). An “Individual Investor” is a natural person that is the legal holder of record of Eligible Bonds and will not be eligible to participate in the Invitation.
Eligible Holders tendering their Eligible Bonds pursuant to the Invitation will receive New Bonds of the Republic on the terms and subject to the conditions described in the Exchange Memorandum. All offers to exchange Eligible Bonds made by Eligible Holders (an “Offer” or “Exchange Instruction”) are irrevocable (subject to withdrawal rights under certain limited circumstances). By tendering their Eligible Bonds, Eligible Holders represent and warrant that such Eligible Bonds constitute all the Eligible Bonds owned by them and consent to the blocking by the Central Securities Depository (CSD) of any attempt to transfer them prior to the Settlement Date (as defined below) or the termination of the Invitation by the Republic.
As described in more detail in Table B below (Financial Terms of the New Bonds), interest on the New Bonds will not accrue until 2024, starting at 0% coupon in 2023 that steps up to 5% in 2024, and 10% from 2025 onwards. The first interest payment on the New Bonds will be made in 2024.
Offers may only be submitted starting today (the “Launch Date”) and ending at 4:00 p.m. (Greenwich Mean Time (GMT)) on 19 December 2022 (the “Expiration Date”). However, Ghana may at its sole discretion extend the Expiration Date (including for one or more series of Eligible Bonds).
Eligible Holders who deliver valid Offers at or prior to the Expiration Date that are accepted by the Republic will receive at the Settlement Date (as defined below) in exchange for their Eligible Bonds accepted by the Republic, the same aggregate principal amount distributed across new bonds due in 2027 (the “New 2027 Bond”), 2029 (the “New 2029 Bond”), 2032 (the “New 2032 Bond”), and 203e “New 2037 Bond,” and collectively the “New Bonds”) in the following proportions: