Ghana Asks Bondholders to Take Haircuts of as Much as 40%

Ghana’s dollar bonds slumped, posting some of the worst losses among emerging-market peers, after the government asked bondholders to accept a nominal haircut of as much as 40%.

(Bloomberg) — Ghana’s dollar bonds slumped, posting some of the worst losses among emerging-market peers, after the government asked bondholders to accept a nominal haircut of as much as 40%. 

The West African nation’s eurobond maturing April 2025 fell 2.1 cents on the dollar to 37.46, the biggest loss in Bloomberg EM Sovereign Total Return Index. Thirteen other Ghana bonds were among the 20 worst performers on the gauge after Finance Minister Ken Ofori-Atta made the proposal public Monday. 

Ghana, which halted payments on its eurobond debt in December, is negotiating with bondholders to meet its debt-reduction target under a $3 billion bailout program from the International Monetary Fund. Two commercial creditor groups, one regional and one international, have shared their restructuring proposals, Ofori-Atta said at a live-streamed investor presentation.

“In our indicative scenario, the restructuring terms for bondholders involve a nominal haircut between 30% and 40%, looking at coupons of no more than 5% and final maturities of no more than maybe 20 years,” he said. “We expect to accelerate a constructive dialog in the coming weeks,” aiming for a deal by year-end.

The government’s parameters are broadly in line with Barclays’ earlier assumptions, strategists Andreas Kolbe and Michael Kafe said in a note Tuesday. 

“We believe that Ghana aggregate recovery rates around $50 for unsecured bonds are possible,” leaving 8-10 points of potential upside across most of the curve, they said, recommending Ghana’s 2026 and 2051 dollar bonds to maximize returns.

Morgan Stanley also expects the terms offered by the government to improve.

“This is only a first proposal and various revisions will likely be made, presumably with a higher recovery value,” Stategist Neville Mandimika said in a note Tuesday, having predicted in May that bondholders would likely lose 30% on their principal and 20% on their interest, with no maturity extensions. 

Bilateral Talks

Ghana is also trying to firm up an agreement in principle with bilateral lenders ahead of an IMF board meeting next month. That agreement would also help lay the groundwork for any accord with commercial creditors due to the comparative treatment principle that guides talks under the Group of 20 Common Framework for Debt Treatment.

Read more: Ghana Confident of Signing Deal to Release $600M in IMF Support

The $77 billion economy is restructuring much of its $50 billion of public debt under the framework, which expands the Paris Club of sovereign creditors to include China and other nations. Bilateral and commercial debt holders are encouraged to agree to comparable terms on a net-present value basis under this arrangement. 

Ghana needs to reduce its debt to 55% of gross domestic product by 2028 from 109% before it started restructuring its liabilities to meet its IMF target. A domestic debt restructuring, which has already been carried out, and a set of fiscal adjustments are set to bring the debt down to 72% of GDP by that year. The accord with external creditors is expected to provide the remaining relief.  

Eurobonds account for $13 billion of the country’s public debt load. 

“We expect this treatment to be consistent” with the goal of making the country’s debt sustainable, Ofori-Atta said. 

–With assistance from Srinivasan Sivabalan and Kerim Karakaya.

(Updates to add analyst reactions starting in the fifth paragraph)

More stories like this are available on

©2023 Bloomberg L.P.