The government of Ghana has invited Pension Funds to exchange GH₵ 31 billion of old bonds for new ones as part of efforts to complete domestic debt restructuring under the ongoing International Monetary Fund (IMF) bailout programme.
The Finance Ministry in Ghana made the announcement in a statement released on July 31.
According to the statement from the Ministry, “This Invitation is intended to enable the Pension Funds to preserve their patrimonial value while exchanging their Eligible Bonds for Bonds that offer more potential liquidity.”
It stated that eligible bondholders would receive exchange bonds from the government on the terms and subject to the conditions outlined in the exchange memorandum if they submitted their eligible bonds in response to the invitation.
The holders will exchange their current bonds from February 2023 for new ones with 2027 and 2028 maturities.
“In 2023 and 2024, both instruments will pay a 5 percent coupon in cash, and the remainder will be capitalised into the nominal amount of the two bonds to comply with the cash constraints and the macro-framework defined under the programme agreed between the government and the IMF,” the statement said.
“The alternative offer has been designed to achieve the same average maturity as pension funds’ current holdings of old bonds, currently between 4 and 5 years, achieve a better average coupon (currently at 18.5 percent), while alleviating the cash constraint for the government during the initial years after the exchange. Overall, the offer preserves the net present value of pension funds’ current holdings of old bonds at a 21 percent discount factor,” the Minister said in a letter accompanying the Memorandum of Exchange.
“All offers to exchange eligible bonds made by eligible holders are irrevocable and subject to withdrawal rights under certain limited circumstances,” the statement said.
The submission of offers, which commenced on July 31, would end on August 18, 2023, but subject to extension, the statement indicated.
“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,” it stated.
The government of Ghana stated that it would issue the new bonds to qualified holders whose offers were accepted for credit to their accounts at Ghana’s CSD on August 25, 2023 (the settlement date).
In addition, the government stated that it reserved the right to postpone the settlement date (including in regard to one or more series of eligible bonds) without giving eligible holders the option to revoke their offers.
If the extended Settlement Date was not later than August 28, 2023, the longstop date, then that would happen.
In the statement, it was stated that “The Government may extend the settlement date beyond such a longstop date and designate a new longstop date.”
The granting of withdrawal rights to eligible holders who submitted offers prior to such an extension would, however, be contingent upon the circumstances outlined in the Exchange Memorandum.
