The Government of Ghana has today, 19th January 2021 released an initial pricing guidance to issue a 6-year bond, tapping the domestic markets for financing.
The 6-year Ghana cedi denominated treasury bond issuance, comes in at a time when the government is battling the new variant of the coronavirus pandemic, coupled with a strain on its budget and harsh economic implications for the country.
Also, the government indicates that the issuance of the bond is to enable the country in the financing of its transactions, to redeem maturing debts as well as to enhance the development of the Ghana financial markets.
The Bank of Ghana, in a statement named five financial institutions: Absa, Databank, Fidelity, IC Securities, and Stanbic, that would be involved in the auction as active book-runners for the bond ensuring that transactions are executed as smoothly and efficiently as possible.
Giving further details concerning the new issuance, the Central Bank indicates that the 6-year bond naturally carry more risk because it is unsecured with a face value of “One Ghana Cedi with a minimum bid of GHS50 Thousand and multiples of GHS1 Thousand” thereafter and is deemed to mature by 2027.
Investors should also expect to receive a single payment of the principal on the bonds because a ‘bullet’ principal repayment method applies to the treasury issuance.
Listing of the bond, is to done on the Ghana Stock Exchange (GSE), in accordance with the Governing Law of Ghana for distribution to both Resident and Non-Resident Investors. This, however, follows after the price at which the bond is supposed to be issued during the initial public offering is determined through a book building format.
The issuance methodology adopted requires that bids are accepted on a yield (percentage) basis and “all successful bids will clear at a single clearing level” with “discretionary allocation at the single clearing level in event of over-subscription”.
A summary of procedures regarding the offer period including the pricing, book-build, and allocation methodology indicates that after the release of the Initial Pricing Guidance today, a “Revised Pricing Guidance” will be made available tomorrow, 20th January 2021 at exactly 9 :00 AM, for carrying out the book-building process, which involves collecting bids from investors at various prices, either above or equal to the floor price for the bond.
Subsequently, the Final Pricing and Allocation of the 6-year Treasury bond will follow suit on Thursday, 21st January 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 because the offer price of the bond is going to be determined after the bid closing date. Also, the 6-year bond has a settlement/ Issue date effective Monday, January 25, 2021.
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 appear to have picked up in the financial markets. However, government borrowing keeps increasing hence, posing risks of escalating debt levels going forward.
