Ghana Cocobod to Save $75 Million With Syndicated Loan

  • Cocobod will refinance bills with average interest rate of 29%
  • Loan raises regulator's borrowing to $2.1 billion this year

Ghana’s cocoa regulator will save $75 million after Parliament approved a second syndicated loan to help pay down the cost of ballooning local debt.

Parliament approved the Cocoa Board’s $300 million credit facility with seven foreign banks on Wednesday. The interest margin is 350 basis points more than the London Interbank Overnight Rate, known as Libor, according to documents submitted to Parliament. The loan has a three-year repayment period and a grace period of one year.

Cocobod has sold more than $500 million of local bills this year to finance its operations, which include purchasing the bean from farmers in the world’s second-largest producer of the crop. The regulator has been selling more of the securities than expected since at least the 2012-2013 season to cover shortfalls.

Investors have reacted by demanding higher interest rates to compensate for the risk as the government’s finances have deteriorated during the same period. Ghana has the continent’s highest borrowing costs and has borrowed nearly $1 billion from the International Monetary Fund as part of a three-year program to rights its economy. The cocoa bills have an average maturity of about 29 percent.

Bill Rollover

The rollover of the cocoa bills “is now adversely affecting Cocobod’s finances,” according to documents submitted to Parliament. “Refinancing the bills with proceeds from the medium-term facility will improve the cash flows, liquidity and the viability of Cocobod and reduce high interest payment on bills.”

Cocobod sold the 182-day cocoa bills to buy fertilizer and chemicals for farmers and finance daily operations.

Cocoa rose 0.2 percent to 2,267 pounds per metric ton in London, extending the year’s gain to 14 percent this year. The gains may potentially aid Ghana, whose crop was the smallest in five years last season.

Lenders participating in the facility include Bank of Tokyo-Mitsubishi UFJ Ltd., Standard Bank Group Ltd., Societe Generale SA, Credit Agricole SA, DZ Bank AG, Natixis SA and Nedbank Capital.

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