Government launches US$809 million bond swap

The Ministry of Finance last Friday invited eligible holders of approximately US$809million worth of United States dollar-denominated domestic notes and bonds to exchange them for a package of new bonds.

The invitation, a sequel to the Domestic Debt Exchange Programme (DDEP) launched in December 2022, seeks to aid government in its objective of managing its public debt, the ministry said in a statement.

“The successful completion of this programme will allow our country to restore sound public finance and sustainable debt levels, and to kick-start economic growth following impacts of the COVID-19 pandemic and global economic shock created by the war in Ukraine,” it stressed.

The invitation, which is available only to registered holders of eligible U.S. dollar-denominated instruments, will expire on July 28, 2023 unless extended or terminated earlier by government at its sole discretion. The settlement date is scheduled for August 4, 2023, with the possibility of an extension subject to certain conditions.

The bonds include the following with these international securities identification numbering (ISIN) numbers: GHGGOG061730, which has a maturity date of November 13, 2023, and an outstanding principal amount of US$260,011,543; GHGGOG061748, also maturing on November 13, 2023, with an outstanding principal amount of US$202,893,638; GHGGOG064916, maturing on November 19, 2026, and the outstanding principal amount associated with it is US$84,633,381; and GHGGOG064908, with a maturity date of November 19, 2026, and an outstanding principal amount of US$261,450,655.

Holders whose offers are accepted will receive new benchmark government bonds denominated in U.S. dollars, with the same aggregate principal amount as their original bonds. The new bonds will have a lower average coupon and an extended average maturity compared to the eligible bonds.

Distribution of the new bonds will be divided equally between the new 2027 bond and the new 2028 bond.

These new bonds are issued with different maturity dates (2027 and 2028) and different annual interest rates (2.75 percent and 3.25 percent). Interest payments will be made semi-annually, in arrears, starting from February 2024 until the maturity date. The principal amount for both bonds will be repaid in a single payment on their respective maturity dates, the finance ministry added.

It is optimistic of achieving similar levels to the previous exercise, which saw approximately 85 percent of eligible holders participating and tendering their bonds and notes – resulting in a total GH¢83billion being exchanged.

Government is hopeful of achieving similar success with the current invitation, stressing the importance of full participation by all eligible holders.

“The successful completion of this domestic debt exchange is a critical component of both the debt reduction programme and programme discussions with the International Monetary Fund (IMF); it will contribute to unlocking support from the international community and allow Ghana to achieve its debt targets. As such, government calls for full participation by all holders of eligible bonds,” a portion of the statement read.

“Government expects overwhelming support for this exchange. The alternative would be a far worse economic crisis, with protracted closure from international markets (including imported goods and services) and further domestic economic instability – both for the real economy and the financial sector. It would also mean depleted fiscal resources to support the vulnerable,” it concluded.

COCOBOD launches GH¢7.93bn bond exchange programme

In a related development, the Ghana Cocoa Board (COCOBOD) has initiated a programme aimed at exchanging GH¢7.93billion worth of bonds for updated ones featuring modified terms, with the goal of managing the organisation’s debt securities and providing investors with an additional investment opportunity.

The voluntary Cocoa bills exchange programme, which forms part of measures to manage debt and expand investment opportunities, invites holders of COCOBOD’s short-term debt securities to swap their bills for longer-term debt securities issued by COCOBOD between July 14, 2023 and July 31, 2023, it said.

Holders whose offers are accepted will receive five different bonds, with a total principal amount rounded down to the nearest GH¢1 equal to the principal amount of Cocoa bills tendered; and the new instruments will mature annually from 2024 to 2028.

This development occurs as local banks advocate for improved terms in the restructuring of cocoa bill holdings. Government proposes replacing them with five new bonds. Concerns have arisen that the significant reduction in face value of the bills will negatively impact their financial records following the DDEP.

Already, government recently struck a deal with local banks to revamp around GH¢15billion (US$1.35billion) worth of USD bonds and cocoa bills issued domestically. According to the agreement, the USD bonds will be transformed into two-term loans featuring reduced interest rates, while the cocoa bills will be converted into a fresh bond offering a yield of 12 percent.

COCOBOD states that this exchange programme is designed to address challenges in cocoa farming and exports, ensuring sustainability of the cocoa industry, workforce and export market. Furthermore, the uncertainty surrounding future cocoa prices has made it difficult to make firm financial commitments.

Therefore, COCOBOD believes that exchange programmes will promote savings, lower coupon rates for bonds, reduce debt costs and offer increased investment options. With CalBank as the arranger, COCOBOD aims to inspire trust among its investors and encourage them to opt for the exchange, thereby boosting confidence in Ghana’s cocoa industry, it said.

In recent times, cocoa prices have experienced a notable increase – primarily due to a decrease in supply. On a specific date, Wednesday, June 28 of this year, cocoa prices on the London futures market skyrocketed to 2,590 pounds per metric tonne, marking the highest level since 1977.

This surge in cocoa prices can be attributed to a projected global supply deficit, largely influenced by unfavourable weather conditions in the sub-region. The region, known for its significant cocoa production, has been impacted by unsettled weather patterns adversely affecting the cocoa crop. As a result, the supply of cocoa has been constrained, leading to a substantial increase in demand and subsequently driving up prices.

The International Cocoa Exchange (ICE) benchmark price, widely recognised as a key indicator of cocoa market trends, has witnessed this 46-year high due to the predicted shortage in global cocoa supply caused by the challenging weather conditions in West Africa. This unprecedented scarcity has triggered a sense of urgency among market participants, prompting them to invest in cocoa futures and thus driving prices to unprecedented levels.

The appreciation of cocoa prices is significant, not only in terms of its historical magnitude but also for its potential implications for the global cocoa industry.



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