Editorial by B&FT: Favourable terms demanded in restructuring cocoa bills

Government’s recently reached agreement with local banks to restructure approximately GH¢15billion (US$1.35billion) of domestically issued USD bonds and cocoa bills appears to have run into trouble.

Under the agreement, the USD bonds will be converted into two-term loans with lower interest rates, while the cocoa bills will be transformed into a new bond with a 12 percent yield.

However, concerns are being raised by banks regarding the reduction in face value of the cocoa bills; thus highlighting challenges faced in the debt restructuring process.

Finding a balance between reducing debt burdens and ensuring the financial stability of banks will be crucial for the restructuring efforts’ success.

As negotiations continue between government, banks and pension funds, it remains to be seen how terms of the debt restructuring will evolve. The outcome of these discussions will have a significant impact on Ghana’s financial landscape and ability to address its debt challenges effectively.

Local banks are pushing for better terms in the restructuring of cocoa bill holdings as government proposes to replace them with five new bonds. The new bonds come with a coupon rate of 12 percent – significantly lower than the previous average entry rate of 30 percent on the bills.

The banks have expressed concern over the steep reduction in face value of the bills. The new loans will have a maturity of five years starting from 2025.

Government closed its Domestic Debt Exchange Programme (DDEP) for GHS-denominated notes and bonds issued by E.S.L.A. Plc. or Daakye Trust Plc. with over 80 percent participation of eligible bondholders.

The programme – which was voluntary – sought to tackle the current economic crisis, bring back macroeconomic stability and guarantee sustainable growth.

Government’s debt restructuring efforts also extend to negotiations with local pension funds to restructure their investment holdings in government securities, with a total value of approximately GH¢29billion.

To government, this agreement with local banks is seen as a positive step toward addressing the country’s debt challenges and improving debt sustainability as government demonstrates commitment to finding solutions and working with official creditors to address the debt situation.

The submission of a memorandum of understanding for the domestic USD bonds to the Securities and Exchange Commission further reinforces the country’s commitment to tackling its debt issues.