The government’s three-tranched Eurobond has been over-subscribed causing the country to secure $3 billion in bids from international investors.
After close of pricing at a road show in London, it was announced that $21 billion was raised which is about seven times more than the targeted amount but only $3 billion was accepted by the delegation, led by the Minister of Finance, Ken Ofori-Atta as budgeted for and approved in the 2019 Budget Statement and Economic Policy of the government.
The $3 billion bond would be raised in three tranches – 7-year, 12-year and 31-year and government is expected to pay 7.875% for the 7year, 8.125% for the 12year and 8.95% for the 31year bond.
According to reports, Bank of America Merrill Lynch and JP Morgan Chase & Co are acting as lead arrangers for the Eurobond with Morgan Stanley, Standard Chartered Plc and Standard Bank Group Ltd., Fidelity Bank Ltd., IC Securities and Databank Group are local co-arrangers.
They are expected to use their presence on the market and connections to get their right level of investor interest in the Eurobond.
This is the first time a sovereign bond from Africa had attracted huge bids, analysts familiar with Eurobonds of emerging markets have stated.
Professor John Gatsi, Head of Finance Department of the University of Cape Coast School of Business has explained that the successful bond issuance will rake in forex liquidity to slow pressures on the cedi.
He explained that government would be happy not because it got the best coupon rate in the ECOWAS region nor the first ever oversubscribed bond issuance. Government’s joy will be about the forex liquidity coming in to slow pressures on the cedi.
He recalled that in “September 2016, with 400% oversubscription of Eurobond in an election year, we were comparing oversubscription and coupon rate with Côte d’Ivoire and Rwanda. In August 2018, oversubscription was about 169%. Recently, Côte d’Ivoire issued 12-yr bond just above 5% coupon rate and 30-yr bond at 6.625%. For the same maturity period, Ghana had 8.125% and 8.95% respectively.”
By implication, if Ghana’s macroeconomic fundamentals and political risk climate influenced investors’ decisions, then Ghana has not improved in reference to its 2016 peer.
The Economist further clarified that repayment of coupon for starts after six months if it is semiannual bond or 12 months if it is annual bond.
Which means, government will start repayment with the bond proceeds if it faces liquidity challenge at the verge of experiencing defaults, at the same time, the public debt stock continues to escalate.
“So, the Eurobond’s proceeds, as planned by government, will immediately start paying near default debts (the practice called refinancing) and within the year, also start paying its own coupon,” Prof. Gatsi noted.
By: Kekeli Kuatsenu/awakenewsonline.com
