Fitch downgrades Ghana’s Eurobonds to “restrictive default”

Credit rating agency, Fitch Ratings, has downgraded Ghana’s foreign bonds (Long Term Foreign Currency Issuer Default Rating) to “restrictive default” from the previous rating of “C”.

The rating agency has further downgraded the country’s $1bn Eurobond maturing January 18, 2026 to “D” (default) from “C”.

According to Fitch Ratings, the downgrade of Ghana’s foreign bonds, reflects the expiration, on 17 February 2023, of the grace period for a missed USD40.625 million coupon payment on its USD1 billion 18 January 2026 Eurobond, as part of the suspension of payments on selected external debt that the government of Ghana announced on 19 December 2022.

The announcement of the external debt service moratorium indicated that the suspension would include payments on Eurobonds, commercial term loans, and most bilateral debt, but excluding payments on multilateral debt, new debt contracted after 19 December 2022, and debt related to short-term trade facilities.

On 10 January 2023 Ghana asked official creditors for a debt restructuring under the G20 common framework. Ghana’s external debt amounted to USD28.4 billion at end-3Q22, of which 46% was Eurobonds. The government aims to reduce debt sufficiently for the IMF/World Bank to conclude that risk of debt distress is moderate, compared with high in the last review in July 2021.

Ghana’s U.S. dollar-denominated notes due October 2030 benefit from a partial credit guarantee (PCG) backed by the International Development Association (IDA) for scheduled debt service payments up to 40% of the original principal, or USD400 million, representing 3.5 years of full interest payments.

The notes are part of the current external debt moratorium and at least the non-guaranteed part is likely to be included in the external debt restructuring. However, the IDA guarantee provides additional liquidity for debt service over the next 3.5 years, and could lead to higher recoveries.

Additionally, a GHS4.2 trillion principal payment was due on 6 February 2023, for which the grace period expires on 21 February 2023. This bond was eligible for the successful domestic debt exchange the government announced on 14 February 2023 with approximately 85% participation of eligible bond holders.

Source: norvanreports.com