DDEP yields GH₵‎82.9bn, others want similar exchange

The Ministry of Finance has announced that approximately 85% of bondholders participated in the Domestic Debt Exchange Programme (DDEP) yielding GH₵‎82.9 billion (GH₵‎82,994,510,128).

Significant achievement

The result is a significant achievement for the government to implement fully the economic strategies in the post-COVID-19 Programme for Economic Growth (PC-PEG) during the current economic crisis.

Government expressed satisfaction with the results, as a substantial majority of the Eligible bondholders joined the initiative.

Settlement Date extended to February 21

According to a statement issued by the Finance Ministry, the Settlement Date of the Exchange has been extended from the previously announced February 14, 2023 to February 21, 2023 to provide sufficient time to settle the new bonds in an efficient manner.

It explained that the Settlement Date extension is only to process the settlement of the new bonds.

Other dates to be adjusted to reflect actual Settlement Date

The Finance Ministry stated that the issue date, interest accrual schedules and payment schedules for the new bonds will be adjusted to reflect the actual Settlement Date.

No new tenders, revocations or withdrawals will be permitted

It emphasised that the exchange period has expired and therefore no new tenders will be accepted, and no revocations or withdrawals will be permitted.

Expressions of interest from other stakeholders

The Finance Ministry announced that it has received expressions of interest from other stakeholders to participate in a similar exchange.

6 month “clear market” provision being modified

In view of this, it explained that government is modifying the six-month “clear market” provision of the new bonds as set forth in the Exchange Memorandum.

It said the move is to clarify that such clear market provision will not limit the government from issuing Domestic Public Indebtedness in connection with liability management exercises involving exchanges or similar exercises that do not involve the issuance of Domestic Public Indebtedness for cash consideration.

It explained that except as set forth in the preceding paragraphs, the terms and conditions of the Exchange are not modified or amended.

Outstanding Principal Amounts differ

The statement pointed out that the outstanding principal amounts presented in this press release differ from the Outstanding Principal Amounts in the Exchange Memorandum and have been adjusted to deduct: (a) amounts of Eligible Bonds held by persons that are not Eligible Holders and that were not eligible to participate in the Exchange; and (b) amounts held by persons that following the announcement of the Exchange converted their Eligible Bonds to treasury bills.

Coupon payments and maturing principals to be honoured

In a related development, government assured all bondholders, including those who self-exempted from the voluntary DDEP that it will honour all coupon payments and maturing principals when due.

Maturities from February 6

Payment of coupons and principal for bonds that matured since   February 6 to date (herein referred to as ‘Due Bonds’ remain outstanding.

Bondholders want government to make payments not later than Friday, February 17, 2023.

The Finance Ministry pledged to honour all coupon payments and maturing principals in addition to commitments to further streamline Government’s expenditures.

“We would like to stress that, all Individual bondholders, especially our Senior Citizens, should rest assured that their coupon payments and maturing principals, like all Government bonds, will be honoured in line with Government’s Fiscal commitments.

“The Government would like to reassure all individual bondholders who elected not to participate that your coupon payments and maturing principals, like all Government bonds, will be honoured in line with Government fiscal commitments,” it added.

Factors that impacted economy negatively

COVID-19, Russia-Ukraine war, soaring energy and food prices, higher interest rates, a strong dollar and a global slowdown negatively affected the economy.

Ghana seeking $3 billion loan

Ghana and the International Monetary Fund (IMF) have reached staff-level agreement on economic policies and reforms to be supported by a new three-year arrangement under the Extended Credit Facility (ECF) of about $3 billion.

But, the IMF has made it clear that the Board approval of the deal is contingent on a successful debt exchange programme.

GH₵137bn DDEP

Government therefore launched a programme to restructure GH₵137 billion of domestic debts and also suspended payment of interest of foreign debt pending outcome of plans to restructure foreign debts.

Capacity to service public debts effectively

Government reiterated that the DDEP had been executed to help protect the economy and enhance Ghana’s capacity to service its public debts effectively, as its debt had become unsustainable.

The alternative for not executing the DDEP would have brought grave disorder in the servicing of national debt and exacerbated the current economic crisis.
Fears of those who opted against signing up

There are fears that those who opt against signing up are not guaranteed market liquidity for the old bonds, because they are likely to become less tradeable on the secondary market compared with the new bonds.

More certainty for those who signed up

On the other hand, individuals who signed up for the new bonds will have more certainty even in a changing economic landscape.

Significant amendments

Significant amendments have enabled government to reach an agreement with key major domestic creditor categories including banks, insurance companies, capital market players and foreign holders of domestic debt in relation to their participation in the DDEP.

Offer for individual bondholders

Under the improved offer, all individual bondholders who are below the age of 59 years (Category A) are being offered instruments with a maximum maturity of 5 years, instead of 15 years, and a 10% coupon rate

Improved offer for retirees

All retirees (including those retiring in 2023) (Category B) are being offered instruments with a maximum maturity of 5 years, instead of 15 years, and a 15% coupon rate.

This is to ensure that individuals, especially retirees, who put their hard earned savings in the domestic market, are not left in hardship as a result of the DDEP and yet contribute to the resolution of the current crisis.

5% coupon on 2023 bonds

All of the institutional bondholders will be paid a 5% coupon on their 2023 bonds.

9% coupons for all other restructured bonds

All other restructured bonds will pay 9% coupons for each of the 12 new bonds, rather than the variable rates originally outlined.

Some clauses in the original Exchange removed

Under the agreement, the government has removed all clauses in the Exchange Memorandum that empower the government to, at its sole discretion, vary the terms of the Exchange.