Business News of Fri, 21 Apr 20174
$2.25bn bond: Come again - Minority to Ministry of Finance
The Minority in Parliament has said the Ministry of Finance (MoF) must “come again” and explain to the public, the processes leading to the recent issuance of a $2.25billion domestic bond and the “conflict of interest situations arising out the transaction.”
The Minority, in an earlier press conference claimed that the bond was issued in “secrecy”, without parliamentary approval, and “cooked” to favour US-based investor Franklin Templeton, who bought 95% of it.
Following the Minority’s press conference, the Ministry of Finance issued a press statement describing the Minority’s claims as “maliciously designed to malign and negate the positive news and rave reviews this landmark transaction has garnered, both locally and internationally.”
Below is the MoF’s full statement:
ASPERSIONS ON THE US$2.25 BILLION OF DOMESTIC CEDI DENOMINATED BONDS ISSUED BY THE GOVERNMENT OF GHANA
1. The attention of the Ministry of Finance has been drawn to a statement issued by the Minority in Parliament which seeks to cast negative aspersions on the 9.7 billion cedis (USD2.25 billion) domestic bond issue of the Government of Ghana.
2. The Ministry considers the statement as unfortunate especially as it was fronted by Hon Cassiel Ato Forson, a former Deputy Finance Minister, who knows very well the workings and processes for the issue of domestic bonds and as such, should not be making such baseless allegations. As such, the Ministry has no choice but to surmise that these allegations are maliciously designed to malign and negate the positive news and rave reviews this landmark transaction has garnered, both locally and internationally.
3. The Minority statement sets out three (3) major claims which the Ministry will like to clear.
(a) That the issuance was shrouded in secrecy to the extent that other investors were denied the opportunity to participate in the transaction.
(b) The transaction was “cooked” to favour a particular investor (Franklin Templeton (FT) just because a director of one of the funds FT manages, knows the Finance Minister; and
(c) The transaction should have received Parliamentary approval because it technically should be considered to be a dollar denominated sovereign bond issue due to the level of foreign investor participation and that, in the view of the Minority, it amounted to a private placement
To the aforementioned claims, the Ministry responds as follows:
1. The issuance was not shrouded in secrecy nor was it “cooked” for any particular investor. The Bookrunners, (Barclays, Stanbic and SAS), on behalf of the Ministry of Finance have been mandated since 2015 to issue these domestic bonds on a regular basis as per the debt issuance calendar which Ministry of Finance (MoF) puts out every quarter. Also the book runners announce and publish every impending bond issue to the market, the week of issue and provide price guidance to the market. This particular bond issue was no different and was done in conformity with the established process. It was announced by the Book Runners to the market on March 30, via email and same published on MoF and Bank of Ghana (BoG) websites with settlement on April 3. FT was not the only participant, there were over 25 other buyers including other foreign entities, who all brought in dollars to convert to cedis to buy the bonds.
2. This bond issue, like all the others done prior could not have been designed to favour any single investor. The conventional processes for the issue of bonds using the book building approach were adhered to in this particular issuance. It is our understanding that the said investor engaged various market participants and other key institutions including the IMF before deciding to participate in the bonds. It is worth noting that local investors also participated. The said investor participated in the issuance in the manner they have always done since 2006 through their local Primary Dealer, Barclays Bank and their local custodians, Standard Chartered Bank and Stanbic Bank. To have obtained preferential treatment, all the above mentioned institutions would have had to conspire to do so, a situation which is unfathomable. The investor in question, FT, has held Government of Ghana bonds of up to USD 2 Billion prior to this transaction. Indeed FT has been buying and investing in government bonds since 2006.
3. This issuance, like all other domestic bonds issued under this bond programme since 2015, did not require Parliamentary approval. Approval was given under the initial application to Parliament in the 2015 Budget Statement and Economic Policy document, to run such a bond issuance program. The Ministry of Finance has the mandate to fund the deficit as contained in the budget approved by Parliament through the issuance of debt instruments and to manage the countries debt stock
Impact of this Transaction
The issuance brought in significant amount of foreign currency, which was converted into cedis to purchase the bond, helping to strengthen the value of the Cedi and providing much-needed respite for the citizens of Ghana
The transaction will also lengthen the maturity periods of government debts thereby reducing the short term redemption and rollover pressures on government.
The proceeds from the bond issue are to be used for liability management and for the re-profiling of our domestic debt stock by repaying more expensive short-term debt as it matures, as such it shall not add to the total debt stock of the nation.
This deal is a positive move in the current debt management strategy being pursued by government and should be applauded.
The Ministry hereby informs the general public to disregard these allegations as they are unfounded and malicious and seek to undermine the credibility and integrity of your Government.
ISSUED BY THE PUBLIC RELATIONS UNIT
MINISTRY OF FINANCE
In response to the Ministry’s press statement, the Minority has again issued another statement demanding further and better particulars. It also said it is “strange that the Ministry of Finance, in its statement to the public, failed to deny the relational interest between the Finance Minister Ken Ofori-Atta and his good friend Trevor G. Trefgarne and his association with Franklin Templeton.”
Read the Minority’s response in full below:
Re: ASPERSIONS ON THE US$2.25 BILLION OF DOMESTIC CEDI DENOMINATED BONDS ISSUED BY THE GOVERNMENT OF GHANA
The Minority in Parliament has taken note of a statement purportedly issued by the Ministry of Finance which seeks to undermine an earlier Minority statement on the US$2.25 billion BOND.
We are surprised that the Ministry of Finance, as an institution, is personalising the debate on the major single largest bond issuance in the history of Ghana by attacking the former Deputy Finance Minister- Hon. Cassiel Ato Forson, who is now the ranking member of the Finance Committee of Parliament for expressing the concerns of the Minority Members of Parliament, and the largest Opposition Party in Ghana - the NDC.
SHROUDED IN SECRECY:
1. Issuance calender:
We wish to state categorically that the 7-year and 15-year BOND was not on the issuance calender as claimed by the Ministry of Finance.
2. Initial Pricing Guidelines:
The initial pricing guidelines of the BOND were issued around 5:37pm on the 30th March 2017 by e-mail at the time that domestic investors may have left their offices.
3. Opening Date and time:
The transaction was opened at 9am on 31st March, 2017.
4. Public Announcement:
The public announcement of the transaction was sent by e-mail at approximately 9:09am on the 31st March, 2017, contrary to the statement by the Ministry of Finance that the announcement was made to the public on the 30th March, 2017. Clearly, the transaction was opened before the announcement was made to the public.
5. Issuance Summary:
The issuance summary was issued on 31st March, 2017, at around 4:20pm by e-mail indicating that the BOND transaction had been closed and announcement made to the public, contrary to the statement by the Ministry of Finance that the BOND transaction was closed on 3rd April 2017.
Indeed, 3rd April, 2017, was only a SETTLEMENT DATE and NOT the CLOSING DATE of the BOND. It is for this reason that we believe that the BOND transaction was not competitive. The timing of the opening and closing announcement was too short for any competitive bidding.
CONFLICT OF INTEREST:
1. It is strange that the Ministry of Finance, in its statement to the public, failed to deny the relational interest between the Finance Minister- Hon. Ken Ofori Atta and his good friend Trevor G. Trefgarne and his association with Franklin Templeton.
2. We urge the Ministry of Finance to come again and explain to the public the processes leading to the issuance of the BOND and the conflict of interest situations arising out the transaction.
Hon. Haruna Iddrisu (MP)