Fitch Ratings has awarded a ‘CCC+’ rating to Ghana’s new US dollar bonds, which were issued on October 9, 2024.
Fitch has also raised Ghana’s Long-Term Local Currency (LTLC) Issuer Default Rating (IDR) to ‘CCC+’ from ‘CCC’.
Fitch has confirmed Ghana’s Long-Term Foreign-Currency (LTFC) IDR as ‘RD’. Fitch normally does not assign Outlooks to IDRs of sovereigns rated ‘CCC+’ or lower.
Fitch also confirmed the ‘CC’ rating on Ghana’s US dollar-denominated notes, partially guaranteed by the International Development Association (IDA), a member of the World Bank Group, due October 2030, but later revoked the rating.
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The issue rating for the IDA-partially guaranteed note maturing in 2030 has been revoked, as the note will no longer exist due to its restructuring.
Ghana successfully completed a debt exchange for its 15 outstanding non-performing Eurobonds, including the IDA-partially backed notes. This follows approval on 98.58% of the total outstanding amount, with each series receiving consent on more than 92% of the outstanding principal, meeting the applicable collective action clause levels.
As a result, the 15 Eurobonds were swapped for five new bonds, and the distribution to eligible holders was completed on October 10, 2024. The ‘CCC+’ rating assigned to these five bonds reflects our assessment of Ghana’s expected credit profile following the completion of the entire debt restructuring, with declining debt supported by ongoing fiscal consolidation and elevated liquidity risks due to high interest spending relative to revenue levels.
In return for the 15 outstanding Eurobonds with a total face value of USD13.1 billion, investors were given a set of new bonds with two alternatives. The ‘disco’ option applies a nominal haircut of 37% to all claims, which are then restructured into two new notes: a step-up coupon amortising note due 2029 and a step-up coupon amortising note due 2035. The step-up coupon rates range between 5% and 6%.
Under the ‘par’ option, there is no nominal haircut, but claims are restructured to a 1.5% amortizing note due in 2037. In exchange for past-due interest, the ‘disco’ and ‘par’ options receive a zero-coupon amortising note due 2026 and a zero-coupon note due 2030, respectively. The restructure does not include value-recovery mechanisms. Tenders
The Eurobond exchange results in a reduction of Ghana’s FC debt stock (including PDIs) of approximately 6% of expected 2024 GDP. FC debt service is decreased by USD3.5 billion from 2024 to 2026. Interest payments are decreased by 1.3% of GDP in 2024, 0.9% in 2025, and 0.6% in 2026 compared to the bonds’ original terms. These projections do not account for the cost of rolling over bonds (at higher coupon rates, given market conditions) that would have matured in 2023-2026, meaning more actual debt relief.
Debt declines
Assuming a comparable treatment of FC commercial debt that still needs to be restructured, the debt stock reduction would equal 7% of the expected 2024 GDP. This, paired with a robust medium-term growth expectation and continuous