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Ghana proposes losses for Eurobond holders in debt restructuring

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(Bloomberg) — Ghana will ask holders of its international bonds to accept losses of up to 30% on principal and waive some interest payments as it prepares a debt stabilization plan to qualify for loans from the International Monetary Fund.

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Deputy Finance Minister John Kumah told Joy FM radio in Accra that the West African country would also ask domestic bondholders to forfeit some of the interest payments. He confirmed the planned restructuring in an interview with Bloomberg.

“These are proposals,” Kumah said by telephone on Thursday. “Soon we will start talks with both local and foreign bondholders.”

Ghana is negotiating a $3 billion program with the IMF after it was excluded from international debt markets amid a sell-off of its dollar debt that pushed yields to crisis levels. The cedi was the world’s worst-performing currency against the dollar this year, driving up the cost of debt.

interest suspension

Apart from the principal reduction, the government wants to suspend interest payments on foreign bonds for three years. Kumah said on the air that domestic bond investors would be asked to trade in their existing securities for the new bonds, which could offer zero coupons in year one, 5% in year two and 10% in year three.

The restructuring is designed to help Ghana meet debt stability requirements to qualify for the IMF bailout it has been negotiating since September, and possibly a staff-level deal with the Washington-based lender before the end of the year . Will reach.

“The foreign debt holders will get their share,” Kumah told Joy FM. We have already assembled a committee to initiate backstage engagement with our bondholders.

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The yield on Ghana’s $1.2 billion 2032 Eurobond fell 56 basis points to 30.34% on Thursday. Premium investors seeking to hold the country’s dollar bonds rather than U.S. Treasuries rose 3,158 basis points, well above the 1,000 level considered critical.

Fitch Ratings would downgrade the country’s long-term issuer rating to RD, one notch above CC, if the debt is restructured as part of IMF talks, it told Bloomberg in an interview last month. told.

This rating is assigned to an issuer that, in Fitch’s opinion, has “experienced an indefinite default or distressed debt transaction” but has not filed for bankruptcy or entered any other form of administration.

In September, the rating agency downgraded Ghana Credit’s rating to CCC for the third time this year, four notches below investment grade.

(Updated with details on national debt from sixth paragraph)

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