Business News of Fri, 21 Apr 20172

Government debunks ‘secret’ US$2.25bn bond sale

Ken Ofori Attah{ Fresh ken Ofori-Atta, Finance Minister

The Finance Ministry has described as unfortunate statements by the minority in Parliament that the recent US$2.25 billion domestic bonds it issued was deliberately skewed to favor a particular investor who bought substantially into one of the bonds.

The bonds, issued early part of this month, had varying tenors including: 5-year, 7-year, 10-year, and 15-year maturities.

But the minority in Parliament on Tuesday accused government of not conducting this bond sale according to the laid down procedure, ostensibly, to favour one investor, Franklin Templeton Investments--a global investment firm listed on the New York Stock Exchange.

The minority claims that a fund manager at Franklin Templeton is a former colleague of the current Finance Minister, Ken Ofori-Atta, and therefore a potential conflict of interest may exist.

But the Finance Ministry, in a statement released on Wednesday, said the accusations are unfortunate and could only be made out of malicious purposes as the statements were ‘baseless’.

The issuance of the bonds, the Ministry said, was not shrouded in secrecy nor was it “cooked” for any particular investor.

The Ministry explained that the book runners, (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 puts out every quarter.

“…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. Franklin Templeton 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,” the Ministry said.

Regarding its attempt to favour the said investor, the Ministry said, the conventional processes for the issue of bonds using the book building approach were adhered to in this particular issuance.

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“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 Ministry charged.

The investor in question, Franklin Templeton Investments, is said to have held Government of Ghana bonds of up to US$2 billion prior to this transaction and it said to have been buying and investing in government bonds since 2006.

This issuance, like all other domestic bonds issued under this bond program since 2015, the Ministry argued, did not require parliamentary approval.

Approval, the Ministry explained, 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 release stated that, 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.

The bond transaction is expected to lengthen the maturity periods of government debts thereby reducing the short-term redemption and rollover pressures on government.

The proceeds from the bond issue will be used for liability management and for the re-profiling of the country’s 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, the Ministry added.

The Ministry urged that the allegations made by the minority be disregarded as they are unfounded and malicious and seek to undermine the credibility and integrity of the government.

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