Ghana Eurobond Return More Than Five Times Oversubscribed

  • Government sells bond at 9.25% to pay debt, fund projects
  • Ghana last month abandoned sale plans due to price demanded

Ghana raised $750 million selling Eurobonds at a yield of 9.25 percent in an auction that was more than five times oversubscribed, a month after abandoning plans to issue debt due to the price demanded by investors. Yields on the nation’s existing dollar bonds fell to 14-month lows.

The country received orders exceeding $4 billion for the bond that will be repaid in three equal installments between September 2020 and the same month in 2022, the Ministry of Finance said in an e-mailed statement on Thursday. The proceeds will be used to refinance existing debt and fund capital investments, the ministry said earlier in the day.

The investor demand indicates a “high appetite for Ghana’s credit,” the ministry said. “The transaction is a vindication of the decision taken in August not to issue immediately.”

Interest Costs

The sale comes after the International Monetary Fund earlier this month sought assurances that the West African nation won’t use funding from the Bank of Ghana ahead of December elections, before releasing a fourth tranche of $115 million under an extended credit facility deal. Ghana agreed to a near-$1 billion program with the Washington-based lender in April last year to help rein in the budget deficit and arrest declines in the cedi.

“Lots of investors are looking for high yields in emerging markets,” Lutz Roehmeyer, a money manager at Landesbank Berlin Investment, which oversees about $12 billion of assets, said by phone from the German capital before the sale was concluded. “They’ll even save some interest costs. The yields now are lower than what they would have got two months ago.”

About $400 million of the bond proceeds will be used to refinance securities maturing in 2017, with the rest being used for capital projects, Finance Minister Seth Terkper said in an interview in Accra, the capital, on Wednesday. Yields on the 2017 notes fell 9 basis points to 5.08 percent by 8:45 a.m. in London after plunging 110 basis points on Thursday. The cedi strengthened 0.3 percent to 3.9450 per dollar. Yields on $1 billion of securities due Aug. 2023 dropped 3 basis points to 9.11 percent, the lowest since July 2015

The “government is not under pressure to overspend and neither are we considering any spending that will not allow the country to meet the fiscal deficits set for the year,” Terkper said in a separate statement on Thursday. President John Dramani Mahama has assured the IMF “of his willingness and commitment to ensure the success of the program,” Terkper said.

“Given where they funded recently at a much more expensive rate, it’s relatively attractive,” Claudia Calich, a London-based money manager at M&G Ltd., which oversees about $1 billion in emerging-market debt, said by phone. “It’s still not cheap funding by any means. But it’s not bad given Ghana’s challenges.”

Federal Reserve

Ghana’s Eurobonds have returned 5.9 percent since the beginning of August, compared with the average of 4.3 percent for dollar debt of 17 sub-Saharan African nations, Bloomberg indexes show. Yields on the nation’s 2023 notes have dropped 144 basis points in the period.

Ghana was tapping the market at a time when emerging market countries are preparing to sell Eurobonds before the U.S. Federal Reserve increases interest rates. In sub-Saharan Africa, only South Africa and Mozambique have sold dollar debt this year.

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