Holders of Ghana’s Eurobonds have formed a creditor committee after the Finance Ministry announced plans to suspend payments on its foreign debts.
The Committee is representative of a diverse group of institutional investors including mutual funds, asset managers, insurance firms, hedge funds, and family offices.
In a statement on Monday, the group announced that the steering members of the committee will include Abrdn, Amundi (UK) Limited, BlackRock, Greylock Capital Management and Ninety One
“The Committee is focused on the orderly and comprehensive resolution of Ghana’s debt challenges, recognizing that such resolution will require fair burden-sharing and collaboration among the Ghanaian authorities, private creditors (both domestic and international) and official sector creditors.
The Committee welcomes the authorities’ ongoing engagement with the International Monetary Fund (the “IMF”) and the recent announcement of the Staff Level Agreement.
The Committee notes that a process of good faith negotiation would avoid unilateral actions and would require, inter alia, the timely exchange of detailed economic and financial information among the committee, the Ghanaian authorities and the IMF, and would need to be anchored in reasonably feasible economic adjustment by the Ghanaian authorities.
In this regard, the Committee endorses the Institute of International Finance’s Principles for Stable Capital Flows and Fair Debt Restructuring, which provide meaningful guidance for successful sovereign debt restructurings. The Committee stands ready for a swift engagement on that basis.
The Committee aims at securing an outcome that is both equitable to creditors and responsive to the economic and social challenges facing Ghana. A key factor in measuring the success of Ghana’s debt resolution would be the timely restoration of international market access, which remains critical for Ghana to meet its development objectives.
The Committee has therefore appointed Orrick, Herrington & Sutcliffe LLP as legal advisor and Rothschild & Co as
financial advisor.
This follows the announcement by the government on Monday that its has suspended payments on most of its external debts, effectively defaulting as the country struggles to plug its cavernous balance of payments deficit.
The Finance Minister, Ken Ofori-Atta, said it will not service debts including its Eurobonds, commercial loans and most bilateral loans, calling the decision an “interim emergency measure”, while some bondholders criticised a lack of clarity in the decision.
The government “stands ready to engage in discussions with all of its external creditors to make Ghana’s debt sustainable”, the finance ministry said.
The suspension of debt payments reflects the parlous state of the economy, which led the government last week to reach a $3-billion staff-level agreement with the International Monetary Fund (IMF).
Ghana had already announced a domestic debt exchange programme and said that an external restructuring was being negotiated with creditors. The IMF has said a comprehensive debt restructuring is a condition of its support.
The country has been struggling to refinance its debt since the start of the year after downgrades by multiple credit rating agencies on concerns it would not be able to issue new Eurobonds.
That has sent Ghana’s debt further into the distressed territory. Its public debt stood at 467.4 billion Ghanaian cedis ($55 billion as per Refinitiv Eikon data) in September, of which 42% was domestic.
It had a balance of payments deficit of more than $3.4 billion in September, down from a surplus of $1.6 billion at the same time last year.
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