DDEP: FirstRand Bank writes-off more than 50% in value of its Ghanaian bonds

Africa’s biggest bank by market capitalization, FirstRand Limited has written-off about 57 percent in the value of its holdings in Ghanaian bonds.

The development comes on the back of Ghana’s decision to undertake a debt restructuring programme for its sovereign debt component.

In a statement issued by the South Africa-based lender on March 2, 2023, FirstRand said it had impaired about $27.3 million to cover potential losses from Ghana’s debt restructuring exercise and reduced income from associates.

The bank further explained that the write-offs in the value of its Ghanaian bonds include both domestic and foreign-currency bonds held as of December 2022.

Chief Executive Officer of FirstRand Limited, Alan Pullinger told Bloomberg, “We’ve marked down both the local-currency and Eurobonds, and we’ve taken a haircut at 57% of face value.”

“That is probably at the conservative end because the market may be talking of 40%”, Alan Pullinger added.

The latest verdict by one of Africa’s biggest banks comes on the back of another verdict by Fitch Ratings which has predicted that the debt restructuring will erode the capital of Ghanaian banks' thereby weakening them, despite improved terms for creditors.

Although government has concluded its settlement and conclusion of the DDEP with about 85 percent participation, the country is yet to commence talks with foreign bondholders on a debt restructuring with the hope of securing an IMF-supported programme to restore the economy by the end of March 2023.

Meanwhile, S&P has predicted that private creditors may have to write off as much as 50 percent of their holdings in Ghanaian bonds which is far higher than the 30 percent government had earlier suggested.

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