Ghana’s sovereign dollar bonds dropped sharply on Tuesday after a government presentation of debt rework scenarios that aimed for a haircut of between 30% and 40% on the principal disappointed investors.
Some bonds fell to their lowest level in three months, with the 2061 issue down as much as 2.9 cents in the dollar to 38.9 cents, Tradeweb data showed. The bonds later recovered some ground, though were still down between 1.5 cents and 2.2 cents in the dollar.
The West African country, which produces gold, cocoa and oil, is in talks with bilateral and commercial creditors to restructure its debts during its worst economic crisis in a generation, having been locked out of international capital markets as it struggles with spiralling domestic debt costs.
Apart from the haircut, Finance Minister Ken Ofori-Atta also told investors that the government was aiming for a coupon of no more than 5% and a final maturity of not more than 20 years on the bonds that would be issued as part of the debt rework for its US$13 billion of outstanding international bonds.
While exact details were still missing, Morgan Stanley said in a note to clients it had calculated a recovery value of $38 versus the current average price of $44 on the bonds.
“In our view, this proposal is unlikely to be accepted by the bondholders as the ultimate recovery value would be extremely low compared to history,” Morgan Stanley’s Neville Z Mandimika said.
“However, it is important to note that this is only a first proposal and various revisions will likely be made, presumably with a higher recovery value,” Mandimika said, adding that the government had also indicated that a value recovery instrument was being considered.
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