Ghana launches 15-yr $1bn Eurobond

Ghana launches 15-yr $1bn Eurobond

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Ghana launched a $1bn Eurobond this week at a 10.75 percent coupon rate, becoming the first country in sub-Saharan Africa outside of South Africa to issue a 15-year bond, finance minister Seth Terkper said in a statement on October 7.
The bond was 100 percent oversubscribed showing a ‘high appetite for Ghana’s credit’ and a World Bank partial bond guarantee of $400 million enabled Ghana ‘to borrow on reasonable terms in a rather difficult market,’ Terkper said.
The government had hoped to launch a $1.5bn bond a week earlier, but delayed the issue because there was little interest at the target yield of up to 9.5 percent, investors told Reuters.
The country’s economy has slowed sharply in the last two years, hit by a fall in global commodity prices that have hurt its gold, cocoa and oil exports.
It is also following an IMF aid programme to restore balance to an economy with double-digit inflation and a debt-to-GDP ratio above 70 percent.
But investors were also deterred by concerns about the Chinese economy and a possible US rate rise, factors that have caused turbulence in emerging debt markets.
Some bankers have criticised the increased borrowing by Ghana and other countries in the region, saying lenders in African nations must instead find domestic savings to invest in local projects. Credit Suisse group chief executive Tidjane Thiam says it is ‘madness’ for African nations to rely on loans in foreign currencies to fund vital infrastructure including roads, power and clean water.
‘We are not going to reach the kind of growth trend that we need if we are unable to do this successfully. You can’t just borrow internationally,’ the Côte d’Ivoire-born banker who took charge of Zurich-based Credit Suisse in June said at a dinner organised by the Financial Times newspaper to conclude a conference on African business early this month. ‘You cannot control your economic destiny if you are not able to mobilise savings and then turn them into productive investment,’ Thiam said.
His warning comes after countries on the continent where he was born sold $11bn of foreign-currency bonds in 2013 and a further $8bn last year, raising concerns among some analysts that a new debt crisis may be developing. The IMF and the UK’s Overseas Development Institute, an independent research group, have written about the risks of African governments taking on too much debt.

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