The Bank of Ghana has announced governments’ quest to cover a shortfall in its financing needs by rolling over a 2-year Ghana Cedi denominated Treasury bond issuance, maturing in 2023.
The 2-year bond is the Republic of Ghana’s first bond issuance in 2021 as the government war against the coronavirus pandemic imposing the heaviest strain on its budget. The amount of borrowing is deemed necessary to sustain household and businesses through the public health crises.
The country’s debt burden reached 71 percent of Gross Domestic Product (GDP) in September this year, one of its highest share breaching some sustainability thresholds according to the Governor of the Bank of Ghana.
Analysts also emphasize that the bond issuance is especially necessary if the government’s borrowing cost are super-low and investors still seem eager to buy its debt as fast as it is issued.
Although some uncertainties continue to remain in the market with investors mindful of the COVID-19 pandemic and other fiscal challenges in the Ghanaian economy, Investors’ appetite for bonds appear to have picked up, even though, they are usually unsecured implying that they naturally carry more risk. Total bonds traded hit GH¢1,839.65 million at the government’s last auction showing a bounce back in investors’ confidence.
With a ‘bullet’ principal repayment method, investors are to receive a single payment of the principal on the bonds which have a face value of “One Ghana Cedi with a minimum bid of GHS50 Thousand and multiples of GHS1 Thousand, thereafter”.
The Bank of Ghana also opined that the bond issuance is in accordance with the Governing Law of Ghana and it’s to be “marketed to Resident Investors or Open to Non-Resident Investors” through a listing done on the Ghana Stock Exchange (GSE).
The 2-year bond is going to be issued through a book building format to determine the price at which the initial public offering (IPO) will be offered and the issuance methodology adopted requires that “all successful bids will clear at a single clearing level ” and there will be “discretionary allocation at the single clearing level in event of over-subscription”.
The issue methodology further requires that aside from the application of the book-building format, bids are accepted on a yield (percentage) basis.
The procedures regarding the offer period including the pricing, book-build, and allocation methodology started on Tuesday, December 29, 2020 marking the release of the Initial Pricing Guidance.
At exactly 9:00 AM today, 30th December, the Bank of Ghana says a “Revised Pricing Guidance” is to be released as necessary during the Book-build.
Subsequently, the Final Pricing and Allocation of the 2-year Treasury bond will follow suit on Thursday, 31st December and involves the release of a “Revised and Final Pricing Guidance” deemed necessary during the Book-build.
The Bank of Ghana has further cautioned that the “books are expected to close around 3:00 PM on Thursday,” so all bids are to be received before the set time. Also, the 2-year bond has a settlement/ Issue date effective Monday, January 4, 2021.
The Bank of Ghana finally informs the general investing public that the Treasury bond Issuance is arranged by Absa, Databank, Fidelity, IC Securities, and Stanbic as “active joint book-runners for the bond” meaning they are to ensure that transactions are executed as smoothly and efficiently as possible.
