Ghana strikes deal with bondholders to end debt default

Ghana has agreed a deal that will wipe nearly 40 per cent off the value of $13bn in international bonds, putting the west African nation on a path to end almost two years in default on its debt.

Bondholders including Abrdn, Neuberger Berman, Greylock Capital Management and Amundi will give up $4.7bn of their original claim, Ghana’s government and a committee representing the foreign creditors said in statements on Monday.

The deal is the latest sovereign debt restructuring launched under a G20-approved “common framework” to limp to the finishing line, after the process was beset by delays.

Bondholders also finally voted to approve a restructuring by Zambia last month under the framework, almost four years after the southern African nation defaulted.

Ghana’s deal “entails important concessions from bondholders, while providing the required debt relief to the government”, the government said. It is expected to comply with IMF-set debt targets, it added.

Ghana has also been in talks with official lenders which are now expected to assess whether the terms offered to private bondholders match the scale of relief they are negotiating.

Most of the bonds will lose 37 per cent of their face value as they are restructured into debts with longer maturities that pay interest of 5 per cent over the next four years. Up to $1.6bn of the new bonds will not be subject to a reduction in face value but will carry lower interest rates of 1.5 per cent.

The international bondholder committee owns about 40 per cent of the debt, while a regional bondholder committee owns another 15 per cent.

The agreement, which the government said could be consummated within weeks, sets Ghana on a course to leave default by the time of elections in December in which President Nana Akufo-Addo is stepping down.

Ghana fell behind on paying external debts of nearly $30bn at the end of 2022 after double-digit inflation and turmoil in the country’s key exports of gold, cocoa and oil ravaged the economy.

The country received a $3bn bailout from the IMF that required debt relief talks with creditors, which the Ghanaian government opted to conduct via the then-new G20 process.

But the common framework has largely failed to streamline sovereign debt restructuring negotiations, particularly in countries that have built up a much wider array of creditors than in past crises, making co-ordination harder.

Ghana’s bondholder talks also hit a hurdle in April when the IMF judged an initial deal would fail to meet debt targets.

In a reflection of how recent restructurings have had to navigate tensions between creditors, the Ghana deal also includes a so-called most favoured creditor clause that will prevent the government giving other lenders better terms than the bondholders.

Ghana will also be required “to publish certain public debt information on a semi-annual basis” and be barred from legal challenges to the bonds.

The international bondholder committee said these debt clauses “are part of the package of measures to normalise relations with bondholder investors and to progress towards restoring Ghana’s international market access”.