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Ghana has secured a preliminary agreement with two groups of bondholders to restructure around $13 billion of its debt, as announced on Monday. This achievement makes Ghana the second African nation this month to advance significantly in a debt restructuring process.

Under the terms of the agreement, Ghana's bondholders will relinquish about $4.7 billion of their loans, providing cash flow relief of approximately $4.4 billion through 2026, aligning with the conclusion of the nation's current International Monetary Fund (IMF) program.

"The formal launch of the consent solicitation is expected in the upcoming weeks," stated the government, referring to the process of presenting the proposal to all bondholders. Approval of this proposal would enable Ghana to emerge from default.
Details of the arrangement, which involve a principal 'haircut' of up to 37%, were first disclosed by Reuters on Thursday.

The IMF characterized the deal as "a significant positive step" for Ghana, while the committee representing international bondholders indicated it would facilitate the country's path to economic recovery.

Bondholder Options

This development follows a recent agreement Ghana reached with its bilateral creditors and a slow-moving restructuring in Zambia earlier this month.
Theo Acheampong, an analyst at S&P Global Market Intelligence, noted that the 18-month duration Ghana took "has actually been much faster" than Zambia's process, and this should assist in the country's recovery.

The Paris Club of creditor nations, typically responsible for coordinating communications for official creditors, did not respond to a request for comment. Nevertheless, the government stated that the official creditor committee, co-chaired by France and China, viewed the agreement as a solid foundation for consultation under the principle of "Comparability of Treatment"—an analysis ensuring bondholders do not receive overly favorable terms.

Bondholders now have two options:

 

1. A "disco bond" offering a 5% interest rate, increasing to 6% after mid-2028, with maturities across three instruments ranging from 2026 to 2029. This option includes a 37% principal haircut.

2. A par bond option capped at $1.6 billion with three instruments, where the primary one will pay a 1.5% coupon and mature in 2037 with no principal haircut, except for a write-down of past due interest.

Additionally, a separate bond partially guaranteed by the World Bank will have the multilateral lender fully pay the guaranteed portion to holders, while the unprotected part will be treated like the rest of the country's bonds.

 

IMF Funding

The agreement is expected to prompt the IMF board to approve the next $360 million tranche of Ghana's $3 billion support program during its meeting on June 28.

 

Ghana, a major gold and cocoa producer in West Africa, defaulted on most of its $30 billion in external debt in 2022. This default resulted from the compounded effects of the COVID-19 pandemic, the war in Ukraine, and rising global interest rates on years of excessive borrowing.

Formal negotiations with the two groups of bondholders began in mid-March, including international asset managers, hedge funds, and regional African banks. Ghana is restructuring its debt under the G20 Common Framework, which has also facilitated agreements for Zambia and Chad. Ethiopia is anticipated to follow, although the framework has been widely criticized for its slow and cumbersome process.

Ghana's bonds saw a slight decline following Monday's confirmation of the agreement but have risen over 15% since expectations of a deal started to build in March.