The Bank of Ghana has released an initial pricing guidance following the government’s intention to issue a cedi-denominated bond which was previously of 5-year maturity but now rolled into a 7-year bond.

This debt security will raise money to support government’s spending and other obligations including the financing of projects, to redeem maturing debts as well as to cover recorded budget deficits. Also, this will go a long way to increase diversification of investor base and funding sources, enhancing capital inflows, liquidity, and the development of the Ghana financial markets.

Despite the fact that government-backed bonds are nearly risk-free in nature, the Bank of Ghana cautions that the bond is Senior Unsecured and as such can carry risks including country risk, political risk, and central-bank risk.

In a statement, the Central Bank named nine financial institutions including Absa, Black Star, CalBank, Databank, Fidelity, GCB, IC Securities, and Stanbic, that would be involved in the auction as active book-runners for the bond. These financial institutions are active bond market specialists who are to ensure that transactions are executed as smoothly and efficiently as possible.

Meanwhile, the bond will be listed on the Ghana Stock Exchange (GSE), in accordance with the Governing Law of Ghana for distribution to both Resident and Non-Resident Investors.

The issue price of the bond is to be determined through a book building process, which involves inviting investors to submit bids for the number of shares and the price they would be willing to pay for them. That said, each bond shall have a face value of One Ghana Cedi with a minimum bid of GHS50 Thousand and multiples of GHS1 Thousand thereafter.

Book-building process for bond issuance

Furthermore, the bond is intended to mature by 2028 with a settlement/ Issue date effective June 21, 2021. Following this, investors should also expect to receive a single payment of its principal upon maturity because a ‘bullet’ principal repayment method applies to the treasury issuance.

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”. That notwithstanding, the issuance is subject to “discretionary allocation at the single clearing level in event of over-subscription,” the statement indicates.

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, a “Revised Pricing Guidance” was opened yesterday, June 16, 2021 during the book-build process.

Moreover, the Final Pricing and Allocation of the Treasury bond is slated for today, June 17, 2021 and involves the release of a “Revised and Final Pricing Guidance” deemed necessary during the book-build process.

The Bank of Ghana further alerts that, per the allocation arrangement, the books are expected to close around 3:00 PM on Thursday. Therefore, all bids are to be received before the set time because the offer price of the bond is going to be determined after the closing date.