Photographer: Ty Wright/Bloomberg

Ghana Is Said to Weigh Scaling Down $2.3 Billion Bond Plans

  • Nation may stagger sale of local-currency bond for energy debt
  • Potential investors seek improved guarantees for debt

Ghana is considering scaling down plans for a 10 billion cedis ($2.3 billion) local-currency bond sale as the West African nation struggles to identify revenue sources for interest and capital repayments, according to two people familiar with the matter.

The debt, which will be issued through a special-purpose vehicle and backed by a tax on the sale of petroleum products, may be staggered in smaller tranches as the projected income from the levies are only sufficient for a bond sale of 7 billion cedis over 15 years, said the people, who asked not to be identified because they’re not allowed to speak publicly about the issue. The matter was discussed at an Aug. 16 meeting where the Finance Ministry and deal advisers Standard Chartered Bank Ghana Ltd. and Fidelity Bank Ltd. gauged investors’ appetite for the debt.

The ministry will consider more revenue sources before making a final decision on the size of the bond, the people said.

Finance Minister Ken Ofori-Atta and a spokeswoman for Standard Chartered didn’t answer calls seeking comment. Fidelity Bank Managing Director Jim Baiden declined to comment when contacted by phone.

The cedi weakened 0.6 percent to 4.4538 against the dollar at 3:56 p.m. in the capital, Accra, the lowest since March 22. The yield on Ghana’s 2026 dollar bonds fell 7 basis points to 7.3 percent.

Ghana is selling the debt to clear arrears owed to banks by state-owned electricity and petroleum utilities. The seven-month old government of President Nana Akufo-Addo has vowed to boost banks’ ability to lend and accelerate growth after gross domestic product in West Africa’s second-biggest economy expanded at the slowest pace in 26 years in 2016.

Sovereign Guarantee

The stock of non-performing loans at banks was 8 billion cedis on June 30, according to Bank of Ghana data. The three major power utilities, Electricity Company of Ghana, Volta River Authority and Ghana Grid Company, had 7.7 billion cedis in payable loans at the end of 2015, according to the International Monetary Fund.

Some attendees at the Aug. 16 meeting were concerned that the bond won’t carry a sovereign guarantee and are seeking more assurances that the current and future governments will continue to allocate energy sector levies to the special purpose vehicle, said the people.

The ministry and advisers are said to be considering a maturity date of seven to 15 years. Bids are likely to open next month, with the arrangers seeking to place as much as 60 percent of the bond with foreign investors, said the people.

“The main stress in the economy right now is the banking industry, due to its non-performing loans,” Karl Ocran, head of investments at Frontline Capital Advisors Ltd. in Accra, said by phone. “The success or not of the energy bond in September is going to be a catalyst for the next wave of sentiment.”

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