Ghana nears deal with pension funds on $2.6bn debt revamp

BLOOMBERG

Ghana’s pension funds are close to agreeing to a deal to restructure $2.6 billion worth of government bonds they hold, according to an umbrella body for the industry.
Under the plan, the pension funds will receive more interest payments, but over a longer period of time, according to Thomas Esso, executive secretary of the Chamber of Corporate Trustees. The local-currency securities that the funds currently hold mature earlier than the ones that they’ll receive in the swap.
The government asked the pension trustees to exchange their existing securities — which carry an average coupon of 18.5% — for two new bonds maturing in 2027 and 2028 with an average interest rate of 8.4%, Esso said.
To make up for the shortfall, the government will compensate the holders with more securities — which were issued in February — and an additional cash-payment instrument that offers interest of 10%. That will result in a stream of coupon payments totalling 21%, he said. “The overarching concern for our members is not to lose any value of our pension funds,” Esso said in an interview. “Our technical team met on the proposal and we realised that the proposal yields the goal. It captures that.”
The country’s labour unions are holding separate talks with the government on the proposal, after which a memorandum on debt exchange may be issued, he said. Ghana excluded pension funds, which hold 29 billion cedis ($2.6 billion) of government bonds, from the first part of a domestic debt exchange after the labour unions threatened to strike over the prospect of losing their savings.
Ghana embarked on a public debt restructuring in December to qualify for a $3 billion International Monetary Fund programme. The nation’s assets rallied after the IMF approved the package in mid-May, with an immediate disbursement of $600 million.
The government concluded the first part of the domestic debt swap in February. In that exchange, investors other than pension funds exchanged 87.8 billion cedis, or 67% of existing bonds for new ones, against a government target of 80%. The new securities paid as little as 8.35% coupon, compared with an average of 19% on the old notes.
Further drawdowns from the IMF will depend on Ghana meeting fiscal targets under the programme. As a result, the government is racing to reorganise its eurobonds, agree on specific terms of the restructuring with bilateral creditors, and conclude the rest of the domestic debt exchange.

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