Fitch downgrades Ghana's sovereign debt to 'Restrictive Default'

International ratings firm Fitch has downgraded Ghana’s Long-Term Local-Currency (LTLC) Issuer Default Rating (IDR) to Restricted Default (RD) from ‘CCC’.

According to Fitch Ratings, this is due missed payments on some local-currency-denominated bonds issued prior to the Domestic Debt Exchange Programme (DDEP).

In May this year, Fitch Ratings upgraded Ghana’s LTLC IDR to ‘CCC’ from ‘RD’ following the completion of the DDEP on February 21, 2023.

But Fitch in its recent Rating Action Commentary published on April 21, 2023, explained that the reversal reflects missed payments on bonds that were not tendered or held by ineligible entities for participating in the domestic debt restructuring exercise.

“The downgrade of Ghana’s LTLC IDR to RD reflects the missed payments on some local-currency-denominated bonds that were not tendered or that are held by entities not eligible for participating in the domestic debt exchange,” the ratings agency noted.

Fitch continued that, “The Republic of Ghana announced it was resuming payments on local-currency bonds issued prior to the domestic debt exchange (the 'old bonds') on 13 March 2023 to bondholders who were either ineligible or did not participate in the domestic debt exchange. However, the authorities have subsequently acknowledged that only the coupon payments on the two-year note that matured on 20 February 2023 and the 20-year note maturing in 2039 had been made. The principal payment on the former note has not been made”

Fitch further cited uncertainty regarding clearing of missed payments as it believes government has not clarified whether missed payments will be settled to all categories of holders of 'old bonds' after meetings were held with representatives of individual bondholders and pension funds.

Meanwhile, Fitch said about 35 payments consisting of principal or coupon, were due on the outstanding 'old bonds' between January, 20 2023 and April, 20 2023.

In addition to the rating action, Fitch has downgraded Ghana from 'CCC' to 'CC' based on the issue rating of five local-currency bonds issued prior to the debt exchange.

The agency has subsequently also withdrawn the rating on these securities due to the limited information and uncertainty regarding the timely servicing of the securities issued prior to the domestic debt exchange.

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