Sources with firsthand information quoted by Reuters claim that Ghana wants to restructure its debt simply by exchanging its existing bonds for new notes in order to get relief from its approximately $13 billion debt to foreign private creditors.
The sources, who wished to remain anonymous due to the private nature of the discussions, said that representatives and advisors from the finance ministry met with investors in London last week and announced their plan to remove any so-called state-contingent debt instruments—debt that ties payouts to factors like commodity prices or economic performance.
A growing number of bondholders support using these kinds of instruments to reconcile divergent views on the direction of a nation’s economy. Talks about debt restructuring in Sri Lanka and Zambia include a proposal to incorporate these instruments.
Representatives of the steering committee, which owns most of the bonds, and their advisors were met by government officials. Beyond this group, the sources claimed, they also met other investors who had Ghanaian notes.
According to one of the sources, there is disagreement among bondholders regarding the idea; some investors are still looking for a value-recovery tool.
According to a second source, after restructuring based on a conservative overall scenario, the government would be open to introducing an instrument that pays out extra to bondholders—a so-called step up—despite preferring a clear and simple structure.
Ghana was, however, cautious of debt modifications, especially step-downs, in which bond holders lose money if the macroeconomic outcome is not as favourable as anticipated.
Ghana reached an agreement to restructure $5.4 billion in loans with its official creditors earlier this month, and as part of its bailout programme, the IMF granted the country an additional $600 million.
A year prior, the country had started a re-organization due to skyrocketing debt servicing expenses. According to three sources, the advisers of the West African nation delivered a debt restructuring proposal to their counterparts on Friday. One source added that the plan included a principal haircut of more than 30%; however, no other specifics were revealed.