Ghana May Sell $750 Million of Eurobonds to Replace Debt

Ghana, which sold the first Eurobonds in sub-Saharan Africa outside of South Africa in 2007, may issue a further $750 million of the debt to refinance the earlier notes, which mature in October 2017.

“It is under consideration, among other options, to repay the existing Eurobond,” Deputy Finance and Economic Planning Minister Seth Terkper said by phone yesterday from the capital, Accra. The sale may take place in 2013, he said, declining to give details.

Ghana is considering selling a second Eurobond as it looks for ways to finance development plans that will support its growing economy, which is forecast to expand 8.2 percent this year and 7.8 percent in 2013, one of the fastest paces in Africa, according to the International Monetary Fund.

Yields on the 8.5 percent debut notes fell 2 basis points to 4.95 percent by 12:35 p.m. in London. A basis point is equivalent to 0.01 percentage point. Borrowing costs on the dollar debt have declined 327 basis points since their issue in September 2007, according to data compiled by Bloomberg.

“A new Eurobond issuance in 2013 makes sense given the low global rate environment and supportive liquidity conditions,” Samir Gadio, a London-based emerging-markets strategist at Standard Bank Plc, said in an e-mailed response to questions today.

Risky Assets

Ghana may issue a new, larger, bond at the more favorable rates to buy back the existing Eurobond, he said. “As long as rates in the U.S. remain marginal and there is investor appetite for risky assets, the country should be able to reduce its external funding cost with the new issuance,” Gadio said.

Most of Ghana’s budget financing comes from tax collection, loans and grants and bond sales on the domestic market, where yields on the benchmark 91-day notes climbed to record of 23.1 percent on Oct. 12, according to data compiled by Bloomberg.

The Finance Ministry is planning spending to 5.3 billion cedis ($2.8 billion) for the first quarter of 2013, targeting a deficit of 1.2 percent of gross domestic product, it said in October.

In September, Finance and Economic Planning Minister Kwabena Duffuor said the falling yield on the debut bonds made a second sale attractive.

“It will be around the current market yield, and with that we would be saving on government debt commitments,” he said.

Senegal, Ivory Coast, Gabon and Nigeria are among the African countries that have sold Eurobonds since Ghana’s issue.

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