Debt exchange: Government nowhere near 80% participation rate as deadline approaches

The Vice President of policy think tank, IMANI Africa, Bright Simons, has expressed worry over the low participation of bondholders in the government’s debt exchange programme.

The government extended the expiration date of the Invitation of bondholders to sign on to the programme from Friday, 30th December 2022 at 4:00 p.m. (GMT) to Monday, 16th January 2023 at 4:00 p.m. (the “New Expiration Date”).

“The Settlement Date for the Invitation is now expected to occur on Tuesday, 24th January 2023, or as soon as practicable thereafter, but no later than the Longstop Date which is now scheduled for Tuesday, 31st January 2023, unless further extended by the Government pursuant to the Invitation.

“The announcement date is now expected to occur on or about 17th January 2023,” a statement from the Ministry of Finance said.

However, individual bondholders, pensioners, and others have declared their decision to not partake in the program.

Bright Simons cast doubt on the government’s ability to get an 80% participation rate or at least a 60% participation rate to give the green light for the programme to be initiated.

On his Twitter page on January 12, 2023, Bright Simons wrote: “With one working day left before Govt of Ghana's deadline for the debt exchange program, we can confirm that the govt is nowhere near the ideal 80% participation rate. It will also not get the 60% rate it needs to at least show "good progress". Current commitments are too few.”

He attributed the low participation rate to other factors including logistical structures that need to be put in place before the programme begins.

“The problem is not just active resistance. But also, logistical. Some Funds & banks are trying to mobilise client bond owners to sign up 1st before committing to their own holdings & struggling due to general confusion, uncertainty & doubt. Financial literacy is also a block,” he added.

He, therefore, explained that the uncertainty in the financial market coupled with several extensions is further weakening the appetite to participate among the bondholders. Bright Simons asked the government to negotiate with the bondholders in order to arrive at a consensus.

“The effect of all these is that many are afraid of signing away their money whilst holdouts refuse & benefit. Obviously, no one likes to look like a fool. The government’s decision not to build a national consensus will continue to haunt. Advice: no more unilateral deadline extensions.

“Another unilateral extension will simply damage the credibility of the entire exercise & deepen the "wait & see" attitude. If by Monday, participation remains this low, the govt should invest in co-creating the program with creditors before announcing another date,” he intimated.

As part of the Government’s efforts to address the country’s ongoing economic crisis, on December 5, 2022, it launched a domestic debt exchange pursuant to which certain holders of approximately GH¢137.3 billion of the principal amount outstanding of certain of our domestic notes and bonds issued by the Government, E.S.L.A. Plc or Daakye Trust Plc (the “Eligible Bonds”) were invited to exchange their Eligible Bonds for a package of new bonds to be issued by the Government (the “New Bonds”).

1/

With one working day left before Govt of Ghana's deadline for the debt exchange program, we can confirm that the govt is nowhere near the ideal 80% participation rate. It will also not get the 60% rate it needs to at least show "good progress". Current commitments are too few.

— Bright Simons (@BBSimons) January 12, 2023

2/

The problem is not just active resistance. But also logistical. Some Funds & banks are trying to mobilise client bond owners to sign up 1st before committing on their own holdings & struggling due to general confusion, uncertainty & doubt. Financial literacy is also a block.

— Bright Simons (@BBSimons) January 12, 2023

3/

The effect of all these is that many are afraid of signing away their money whilst holdouts refuse & benefit. Obviously, no one likes to look like a fool. The govt's decision not to build national consensus will continue to haunt. Advice: no more unilateral deadline extensions

— Bright Simons (@BBSimons) January 12, 2023

4/

Another unilateral extension will simply damage the credibility of the entire exercise & deepen the "wait & see" attitude. If by Monday, participation remain this low, the govt should invest in co-creating the program with creditors before announcing another date. #EpicFail

— Bright Simons (@BBSimons) January 12, 2023

SSD/DA