Finance Minister Ken Ofori Atta is attributing the oversubscription of Ghana’s Eurobond to high investor confidence in the economy.
Speaking to JoyBusiness from London, Mr Ofori-Atta said the results also show that investors are also satisfied with the government’s fiscal commitment, especially in an election year.
Mr Ofori-Atta said, “This is also a sign of market confidence in the long term prospect of the economy.”
He also added the results of the offer have also demonstrated the government’s ability to manage the economy even after the completion of the IMF program completion.
“Don’t for forget going into this offer, there were concerns about timing, an election year, and you would have expected some hesitancy, but all these did not affect interest in the Eurobond”.
Mr Ofori-Atta added that “our responsibility now is to continue to be on course and manage the macro’s, the fiscals and look at ways to increase revenue to help sustain this investor confidence.” However, the minister added that he strongly believes that they are on course.
Details of Eurobond offer in London
The government on Tuesday closed the Eurobond roadshow and carried out the necessary pricing and fundraising.
About $15 billion worth of bids came in from investors that participated in the offer. However, the government stuck to the $3 billion targeted for the offer.
This means that it was oversubscribed by five times against the targeted amount for the offer. It also decided to raise the funds in three separate tranches. First, the government raised $1.25 billion over six years and it’s expected to pay an interest rate or coupon rate of 6.35 per cent. $1 billion is expected to mature in 14 years at a coupon rate of 7.87 per cent and $750 million dollars in 41 years at a rate of 8.75 per cent.
According to the government, the coupon rate secured on the six-year is the lowest ever recorded by Ghana? It also argued that the 41-year bond is the longest paper issued by a county in Africa
Why did the government go for a tri-tranche in issuing the Eurobond?
Mr Ofori-Atta noted that it was another strategy to test investor confidence in the long term prospects of the economy. The minister also argued that three years after going to the market in 2016, where government raised a six-year bond at 9.250 per cent, now compared to yesterdays results on the 6-year paper, that’s a clear sign of confidence in the economy.
He also argued that it offers an opportunity to be strategic in paying back these bonds.
When would the EUROBOND cash hit BoG’s account?
The finance minister disclosed that all other things being equal the money would hit Bank of Ghana’s account next week. This he says would significantly increase the country’s international reserves.
He added that “Government is committed to supporting the Bank of Ghana to firmly stabilize the cedi throughout the year and even beyond”.
Mr Ofori-Atta noted that another $300 million would hit their accounts coming from the planned mining IPO in March.
Lead Arrangers and Dealers for the offer
The Eurobond roadshow saw more local firms on board this time around, according to government sources. This was part of a broader plan to help equip local firms for possible fundraising exercise in the future.
Based on information picked up from prospectus covering the Eurobond, five local firms are acting as local dealers for the offer. These are Databank, IC securities, GCB Bank, Fidelity Bank and Strategic African Securities.
The International partners on board who are acting as Arrangers and Dealers are; BofA Securities, J. P Morgan, Morgan Stanley, Standard Bank and Standard Chartered Bank.
Planned use of the $3 billion funds
Government is planning to use proceeds from the offer to finance the fiscal deficit. It is also looking at refinancing or repaying outstanding indebtedness, including the energy sector debt, which amongst other measures, may include the refinancing of the existing debt owed IPPs.
They are also looking at using proceeds to finance some infrastructure projects that Finance Minister Ken Ofori-Atta has outlined in the 2020 budget.
Who is leading the Eurobond Team?
Finance Minister Ken Ofori-Atta is leading the team and would be joined by his Deputy Charles Adu Boahene and some officials from the Finance Ministry.
Governor of the Bank of Ghana, Dr Ernest Addison is leading from the Bank of Ghana, supported by his deputies and some technical team from this office.
They are also joined by the various representatives from the dealers and the arrangers of the Eurobond fundraising.
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