The government has invited Pension Funds to exchange GH¢31 billion of old bonds for new ones as part of efforts to complete domestic debt restructuring under the ongoing International Monetary Fund (IMF) bailout programme.
The Finance Ministry announced this in a statement issued on Monday, July 31 and copied to the Ghana News Agency.
“This Invitation is intended to enable the Pension Funds to preserve their patrimonial value, while exchanging their Eligible Bonds for Bonds that offer more potential liquidity,” the Ministry said in the statement.
It indicated that eligible holders tendering their eligible bonds pursuant to the Invitation would receive Exchange Bonds of the Government on the terms and subject to the conditions described in the Exchange Memorandum.
The holders will exchange outstanding bonds issued in February 2023 for new ones maturing in 2027 and 2028.
“In 2023 and 2024, both instruments will pay 5 per cent coupon in cash, and the remainder will be capitalised into the nominal amount of the two bonds to comply with the cash constraints and the macro-framework defined under the programme agreed between the government and the IMF,” the statement said.
“The alternative offer has been designed to achieve the same average maturity as pension funds current holdings of old bonds, currently between 4 and 5 years, achieve a better average coupon (currently at 18.5 per cent while alleviating the cash constraint for the government during the initial years after the exchange. Overall, the offer preserves the net present value of pension funds current holding of old bonds at a 21 per cent discount factor,” the Minister said in a letter accompanying the Memorandum of Exchange,” it added.
“All offers to exchange eligible bonds made by eligible holders are irrevocable subject to withdrawal rights under certain limited circumstances,” the statement said.
The submission of offers, which commenced July 31 would end August 18, 2023, but subject to extension, the statement indicated.
“By tendering their Eligible Bonds, Eligible Holders represent and warrant that such Eligible Bonds constitute all the Eligible Bonds owned by them and consent to the blocking by the Central Securities Depository (CSD) of any attempt to transfer them prior to the Settlement Date (as defined below) or the termination of the Invitation by the Republic,” it stated.
The government indicated that on August 25, 2023 (the settlement date), it would issue the new bonds to eligible holders whose offers were accepted for credit to the account of such eligible holder at Ghana’s CSD.
The government added that it reserved the right to extend the settlement date (including with respect to one or more series of Eligible Bonds) without offering Eligible Holders the right to withdraw their Offers.
That would occur, provided that such extended Settlement Date was not later than August 28, 2023 – the longstop date.
“The government may extend the settlement date beyond such longstop date and designate a new longstop date,” the statement noted.
However, such extension would be subject to the granting of withdrawal rights to eligible holders who submitted offers before such extension, subject to the conditions described in the Exchange Memorandum.