• Latest
  • Trending
Policy rate

Fitch downgrades Ghana’s local-currency credit score to ‘restrictive default’

February 15, 2023
Human skull

Human skull buyer arrested in Tamale

September 29, 2023
Terrorists

Suspected Terrorists Enter Ghana Through Fatchu In Sissala West District

September 29, 2023
Kufuor

Former President Kufuor reveals what is destroying NPP

September 29, 2023
Kennedy Agyapong

Bawumia has promised vice presidential slot to 7 Ashanti Regional MPs – Kennedy Agyapong alleges

September 29, 2023
Owusu Bempah

God has taken the keys to the Presidency from the Elephant – Owusu Bempah

September 29, 2023
Coup

BREAKING: Coup attempt in Burkina Faso, plotters arrested

September 28, 2023
Edudzi Tameklo

Akufo-Addo wants a 3rd term through Bawumia – Edudzi Tameklo

September 28, 2023
dialysis fees

Refund illegal dialysis fees to affected patients – Minority tells Korle-Bu

September 28, 2023
Adwoa Safo

Adwoa Safo roasted as she shares plantain chips in Dome-Kwabenya few days after sharing Yoghurt

September 28, 2023
Alan Kyerematen

I’ll face off NPP leaders if they attempt to discredit me – Alan warns

September 28, 2023
Boakye Agyarko

Many NPP faithfuls are waiting to announce their resignation at the ballot box –  Boakye Agyarko

September 28, 2023
Alan Kyerematen

Alan Kyerematen responds to Justin Kodua on resignation comments

September 28, 2023
ADVERTISEMENT
  • HOME
  • POLITICS
  • GENERAL NEWS
  • INTERNATIONAL NEWS
  • SCHOLARSHIP
  • OPINION
  • JOBS
  • SPORTS
  • Entertainment
InsiderGH.com
  • HOME
  • POLITICS
  • GENERAL NEWS
  • INTERNATIONAL NEWS
  • SCHOLARSHIP
  • OPINION
  • JOBS
  • SPORTS
  • Entertainment
No Result
View All Result
  • HOME
  • POLITICS
  • GENERAL NEWS
  • INTERNATIONAL NEWS
  • SCHOLARSHIP
  • OPINION
  • JOBS
  • SPORTS
  • Entertainment
No Result
View All Result
InsiderGH.com
No Result
View All Result
ADVERTISEMENT
Home News Business

Fitch downgrades Ghana’s local-currency credit score to ‘restrictive default’

February 15, 2023
in Business
Reading Time: 8 mins read
2
Policy rate

Fitch Solutions

Kindly share
Fitch Ratings has downgraded Ghana’s Long-Term (LT) Local Currency (LC) Issuer Default Rating (IDR) to Restricted Default (RD) from ‘C’. The issue ratings on local-currency bonds issued domestically have also been downgraded to Default (D) from ‘C’.

Fitch has affirmed Ghana’s Long-Term Foreign Currency (FC) IDR at ‘C’. Fitch typically does not assign Rating Outlooks to sovereigns with a rating of ‘CCC+’ or below.

A full list of rating actions is at the end of this rating action commentary.

Key Rating Drivers

Related Posts

  • Mubarak Wakaso’s emotional message to Atsu
  • Details of how Director of Administration at vice…
  • Single currency to save Africa US$5 billion annually in…

Local Currency Debt Restructuring Confirmed: The downgrade of Ghana’s local-currency denominated debt follows the completion of a domestic debt exchange offer by the Republic of Ghana. This transaction is an element of the recovery programme for which the government is seeking the support of the IMF. On Dec. 12, 2022, Ghana and the IMF reached a Staff-Level Agreement on a three-year arrangement under the Extended Credit Facility (ECF) of about USD3 billion.

Material Reduction in Terms: All holders, except pension funds, of 67 eligible bonds governed by Ghanaian law and denominated in Ghanaian Cedis (GHS) were invited to exchange their holdings into new bonds with the same aggregate principal amount, plus applicable capitalized accrued and unpaid interest, which have in the aggregate a lower average coupon and extended average maturity than the old bonds.

Collective investment schemes and individual holders below the age of 59 will receive bonds maturing in 2027 and 2028 with a 10% coupon. Individual holders aged 59 or older will receive bonds maturing in 2027 and 2028 with a 15% coupon.

All other participating holders will receive a set of bonds with maturity dates ranging from 2027 to 2033 in exchange of bonds maturing in 2023, and a set of bonds with maturity dates ranging from 2027 to 2038 in exchange of bonds maturing after 2023.

All these bonds will pay a 5% cash coupon and a paid-in-kind coupon of 3.35% to 5.00% until Feb. 13, 2025, and cash coupons ranging from 8.35% to 10.00%, depending on the specific series, from Feb. 14, 2025.

Distressed LC Debt Exchange: In Fitch’s view, this debt exchange constitutes a distressed debt exchange under the agency’s criteria, given this material reduction in terms vis-à-vis the original contractual terms, and given that the exchange is needed to avoid a traditional payment default.

According to Fitch’s sovereign rating criteria, a ‘RD’ rating is consequently assigned to the Long-Term Local Currency Issuer Default Rating. Among the 67 eligible bonds that could be tendered, six are rated by Fitch. A ‘D’ rating has been assigned to these six bonds.

Missed LC Principal Payment: A GHS4.2 trillion principal payment was due on Feb. 6, 2023. In the second amended and restated exchange memorandum released on Feb. 7, authorities announced that eligible holders holding this bond would not receive a final interest payment and a final principal payment, regardless of whether an eligible holder has tendered or not.

In a press release issued on Feb. 14, 2023, authorities announced that coupon payments and maturing principals would be honoured “in line with Government fiscal commitments.” This announcement does not clarify yet when the payment will be made to holders who opted out of the domestic debt exchange.

In particular, it does not clarify whether a principal payment will be made before the expiration of the grace period for this specific issue. This security is one of the six issues that have been downgraded to ‘D’.

Interest Payments to Be Significantly Reduced in 2023: Outstanding principal of eligible bonds amounts to GHS132.4 billion (22% of 2022 estimated GDP). Assuming an 80% participation rate equally distributed among eligible bonds and eligible bondholders, the domestic debt exchange would allow Ghana to reduce its interest payments by 1.5 to 2.0 percentage points of GDP in 2023, not considering the cost, in 2023, of rolling over bonds that would have matured in 2023.

Foreign-Currency Debt Not Affected: Fitch downgraded the Long-Term Foreign Currency Issuer Default Ratings (IDR) to ‘C’ from ‘CC’ on Dec. 21, 2022 following the government’s announcement of a suspension of payments on selected external debt.

Ghana subsequently asked official creditors for a restructuring of its external debt under the G20 Common Framework. A Eurobond coupon payment, due on Jan. 18, 2023, has not been honoured. Fitch has affirmed the LT FC IDR at ‘C’ but will downgrade it to ‘RD’ after the end of the grace period for this coupon payment that expires on Feb. 17, 2023.

Partially Guaranteed Notes Not Affected: Fitch downgraded the issue rating on Ghana’s U.S. dollar-denominated notes due October 2030 to ‘CC’ from ‘B-‘ on Dec. 21, 2022. The notes benefit from a partial credit guarantee (PCG) backed by the International Development Association for scheduled debt service payments up to 40% of the original principal.

Fitch had assigned a multiple-notch uplift to the notes to reflect its view that the PCG reduces the bonds’ potential for default and increases the possible recovery in the event of issuer default. The ‘CC’ rating for the partially guaranteed U.S. dollar-denominated notes due October 2030 has been affirmed.

ESG – Governance: Ghana has an ESG Relevance Score (RS) of ‘5’ for both Political Stability and Rights and for the Rule of Law, Institutional and Regulatory Quality and Control of Corruption. These scores reflect the high weight that the World Bank Governance Indicators (WBGI) have in our proprietary Sovereign Rating Model.

Ghana has a medium WBGI ranking at 50.8, reflecting a recent track record of peaceful political transitions, a moderate level of rights for participation in the political process, moderate institutional capacity, established rule of law and a moderate level of corruption.

ESG – Creditor Rights: Ghana has an ESG Relevance Score (RS) of ‘5’ for Creditor Rights as willingness to service and repay debt is highly relevant to the rating and is a key rating driver with a high weight. The current rating action reflects Fitch’s view that Ghana is in default.

RATING SENSITIVITIES

Factors that could, individually or collectively, lead to negative rating action/downgrade:

–Failure to make scheduled coupon or maturity payments on Ghana’s foreign-currency bonds within the grace period would lead to a downgrade of Ghana’s LT FC IDR to ‘RD’;

–The partially guaranteed notes could be downgraded depending on the evolution of the debt restructuring;

–Failure to honour interest and principal payment on maturing bonds to holders who opted out of the debt exchange during the grace period could result in a prolonged ‘RD’ LT LC IDR.

Factors that could, individually or collectively, lead to positive rating action/upgrade:

–Following the completion of the domestic debt exchange, Fitch will assign Ghana’s Long-Term Local-Currency Issuer Default Rating based on a forward-looking assessment of its willingness and capacity to honour its local currency debt;

–Once Ghana reaches an agreement with private creditors on the restructuring of its foreign currency-denominated debt and completes that restructuring process following the Common Framework official creditors’ claims treatment, Fitch will assign a Long-Term Foreign-Currency Issuer Default Rating based on a forward-looking assessment of its willingness and capacity to honour its foreign-currency debt;

–Evidence that the partially-guaranteed notes will be excluded from the external debt restructuring could lead to an upgrade of the issue rating on the partially guaranteed notes.

Sovereign Rating Model (SRM) and Qualitative Overlay (QO)

Fitch’s proprietary SRM assigns Ghana a score equivalent to a rating of ‘B-‘ on the Long-Term Foreign-Currency IDR scale. However, in accordance with its rating criteria, Fitch’s sovereign rating committee has not utilized the SRM and QO to explain the ratings in this instance. Ratings of ‘CCC+’ and below are instead guided by the rating definitions.

Fitch’s SRM is the agency’s proprietary multiple regression rating model that employs 18 variables based on three-year centred averages, including one year of forecasts, to produce a score equivalent to a LT FC IDR.

Fitch’s QO is a forward-looking qualitative framework designed to allow for adjustment to the SRM output to assign the final rating, reflecting factors within our criteria that are not fully quantifiable and/or not fully reflected in the SRM.

Best/Worst Case Rating Scenario

International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from ‘AAA’ to ‘D’.

Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Ghana has an ESG Relevance Score of ‘5’ for Political Stability and Rights as World Bank Governance Indicators have the highest weight in Fitch’s SRM and are therefore highly relevant to the rating and a key rating driver with a high weight. As Ghana has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile.

Ghana has an ESG Relevance Score of ‘5’ for Rule of Law, Institutional & Regulatory Quality and Control of Corruption as World Bank Governance Indicators have the highest weight in Fitch’s SRM and are therefore highly relevant to the rating and are a key rating driver with a high weight. As Ghana has a percentile rank above 50 for the respective Governance Indicators, this has a positive impact on the credit profile.

Ghana has an ESG Relevance Score of ‘5’ for Creditor Rights, as willingness to service and repay debt is highly relevant to the rating and is a key rating driver with a high weight. The distressed debt exchange reflected in the ‘RD’ LT LC IDR has a negative impact on the credit profile.

Ghana has an ESG Relevance Score of ‘4[+]’for Human Rights and Political Freedoms as the Voice and Accountability pillar of the World Bank Governance Indicators is relevant to the rating and a rating driver. As Ghana has a percentile rank above 50 for the respective Governance Indicator, this has a positive impact on the credit profile.

Except for the matters discussed above, the highest level of ESG credit relevance, if present, is a score of 3. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or to the way in which they are being managed by the entity.

Tags: Fitch SolutionsGhana's local currency
Previous Post

Reason why OSP dragged Director of Admin at Bawumia’s office to court revealed

Next Post

Details of how Director of Administration at vice president’s office attempted to steal a businessman’s imported rice

Related Posts

Hostess Brands
Business

JM Smucker to Acquire Hostess Brands in a $5.6 Billion Deal

September 12, 2023
China's economy
Business

Is China’s economy a ‘ticking time bomb’?

September 3, 2023
Inflation
Business

Inflation rises for the third consecutive month; hits 43.1% for July

August 9, 2023
Beige Bank trial
Business

Investigator reveals GHS21,123,270 transferred to 10 companies and 2 individuals in Beige Bank trial

August 3, 2023
BoG’s financial director’s
Business

Bank of Ghana records GH¢60.81bn loss in 2022

July 30, 2023
Goosehead Insurance
Business

Goosehead Insurance sees net income swell to $7.2m in Q2

July 28, 2023
Next Post
James Keck Osei

Details of how Director of Administration at vice president’s office attempted to steal a businessman’s imported rice

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

  • Trending
  • Comments
  • Latest
Congo coup

BREAKING: Coup underway in Congo-Brazzaville while 79-year-old President  is in the US for UN Summit

September 17, 2023
Gabon coup

BREAKING:Senior Military Officers Announce Coup in Gabon After Rigged Presidential Election

August 30, 2023
Mahama wins NDC presidential race

BREAKING: Mahama officially declares intention to contest for presidency

February 21, 2023
soldiers at ashaiman

Ashaiman: More than 72 people arrested by soldiers – Ashaiman MP

March 7, 2023
Rayzone Group

Government paid $2M to Israeli firm for spy work in 2021- Report

August 2, 2023
NDC Primaries: Ten under 40 MP aspirants to watch

NDC Primaries: Ten under 40 MP aspirants to watch

February 14, 2023
National Cathedral

Okudzeto Ablakwa Drops Bombshell; Publishes The Mother Of All National Cathedral Scandals

January 16, 2023
Alabi Picks Forms For Mahama

Prof. Alabi Picks Forms For Mahama; Says Economy Is In Shambles, Ghanaians Need Him Back

February 22, 2023
Rayzone Group

Government paid $2M to Israeli firm for spy work in 2021- Report

183
Cecilia Dapaah

Cecilia Dapaah: Hotelier, ex-Bantama MP, former Minister mired in a money heist

42
Speaker sets up 7 member C’ttee to probe leaked tape on plot to remove IGP

Gyakye Quayson’s daily trial ‘selective and wrong’ – Bagbin

13
If you had good intentions for NDC, you would have engaged party elders – Zita to Duffour

If you had good intentions for NDC, you would have engaged party elders – Zita to Duffour

13
Mahama’s running mate

BREAKING: NDC Changes Its Leadership In Parliament

10
Supreme Court turned into Stupid Court comment: I’m not talking of Ghana’s judiciary – Kpessa-Whyte clarifies

Supreme Court turned into Stupid Court comment: I’m not talking of Ghana’s judiciary – Kpessa-Whyte clarifies

9
Ablakwa

How Adom-Otchere triggered Ablakwa to release latest set of allegations against Rev. Kusi Boateng

9
NDC has been the best since Ghana's independence – Dr. Duffuor

Duffuor calls for postponement of NDC primaries

8
Human skull

Human skull buyer arrested in Tamale

September 29, 2023
Terrorists

Suspected Terrorists Enter Ghana Through Fatchu In Sissala West District

September 29, 2023
Kufuor

Former President Kufuor reveals what is destroying NPP

September 29, 2023
Kennedy Agyapong

Bawumia has promised vice presidential slot to 7 Ashanti Regional MPs – Kennedy Agyapong alleges

September 29, 2023
Owusu Bempah

God has taken the keys to the Presidency from the Elephant – Owusu Bempah

September 29, 2023
Coup

BREAKING: Coup attempt in Burkina Faso, plotters arrested

September 28, 2023
Edudzi Tameklo

Akufo-Addo wants a 3rd term through Bawumia – Edudzi Tameklo

September 28, 2023
dialysis fees

Refund illegal dialysis fees to affected patients – Minority tells Korle-Bu

September 28, 2023

KINDLY SUBSCRIBE TO INSIDERGH TV

CLICK HERE TO SUBSCRIBE TO OUR YOUTUBE CHANNEL

Recent News

Human skull

Human skull buyer arrested in Tamale

September 29, 2023
Terrorists

Suspected Terrorists Enter Ghana Through Fatchu In Sissala West District

September 29, 2023
Kufuor

Former President Kufuor reveals what is destroying NPP

September 29, 2023
Kennedy Agyapong

Bawumia has promised vice presidential slot to 7 Ashanti Regional MPs – Kennedy Agyapong alleges

September 29, 2023

InsiderGH.com

InsiderGH.com

InsiderGH.com is the fastest growing socio-political news portal in Ghana. Get all breaking news updates, latest news headlines, local and international stories, showbiz, lifestyle etc.

Follow Us

Browse by Category

  • Apps
  • BIOGRAPHY
  • Business
  • Entertainment
  • Fashion
  • Food
  • Gadget
  • Gaming
  • GENERAL NEWS
  • Health
  • INTERNATIONAL NEWS
  • Lifestyle
  • Mobile
  • Movie
  • Music
  • News
  • OPINION
  • POLITICS
  • Review
  • SCHOLARSHIP
  • Science
  • SPORTS
  • Startup
  • Tech
  • Travel
  • World

Pages

  • ABOUT US
  • CONTACT US
  • COOKIE POLICY (EU)
  • DISCLAIMER
  • HOME
  • PRIVACY POLICY
  • Terms and Conditions
  • TERMS OF USE

Copyright © 2020 - 2023, InsiderGH.com. All rights reserved.

No Result
View All Result
  • HOME
  • POLITICS
  • GENERAL NEWS
  • INTERNATIONAL NEWS
  • SCHOLARSHIP
  • OPINION
  • JOBS
  • SPORTS
  • Entertainment

Copyright © 2020 - 2023, InsiderGH.com. All rights reserved.

We are using cookies to give you the best experience on our website.

You can find out more about which cookies we are using or switch them off in .

This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy Policy and Cookie Policy.
InsiderGH.com
InsiderGH.com  GDPR Cookie Compliance
Privacy Overview

This website uses cookies so that we can provide you with the best user experience possible. Cookie information is stored in your browser and performs functions such as recognising you when you return to our website and helping our team to understand which sections of the website you find most interesting and useful.

Strictly Necessary Cookies

Strictly Necessary Cookie should be enabled at all times so that we can save your preferences for cookie settings.

If you disable this cookie, we will not be able to save your preferences. This means that every time you visit this website you will need to enable or disable cookies again.

3rd Party Cookies

This website uses Google Analytics to collect anonymous information such as the number of visitors to the site, and the most popular pages.

Keeping this cookie enabled helps us to improve our website.

Please enable Strictly Necessary Cookies first so that we can save your preferences!

Additional Cookies

This website uses the following additional cookies:

(List the cookies that you are using on the website here.)

Please enable Strictly Necessary Cookies first so that we can save your preferences!

Cookie Policy

More information about our Cookie Policy