FirstRand writes-off 57% of Ghana bonds value amid debt restructuring

ghananewss.comMar 2, 2023 3:00 PM

FirstRand Limited, Africa’s biggest bank by market capitalization, has written off more than half the value of its holdings of Ghanaian bonds as the country grapples with a restructuring of its sovereign debt.

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The South African lender disclosed in a statement on Thursday, March 2, 2023.

The bank said it had impaired $27.3 million to cover potential losses from Ghana’s debt revamp and reduced income from associates.

The write-down includes domestic and foreign-currency bonds held as of December.

“We’ve marked down both the local-currency and Eurobonds, and we’ve taken a haircut at 57% of face value,” Chief Executive Officer Alan Pullinger told Bloomberg.

“That is probably at the conservative end because the market may be talking of 40%”, he added.

Earlier ratings agency, Fitch, had said Ghanaian banks’ capital will still weaken significantly as a result of Ghana’s sovereign domestic debt restructuring, despite the improved terms for creditors after several delays and modifications.

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It said under the final terms of the domestic debt exchange programme, banks exchanging existing local-currency (LC) government bonds for new bonds with lower coupons and longer tenors will suffer only modestly lower net present value (NPV) losses than under the original terms.

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The Ministry of Finance announced on February 14, 2023 that the programme had closed, with creditors representing about 85% of eligible bonds taking part.

Fitch views this as a distressed debt exchange and downgraded Ghana’s Long-Term LC Issuer Default Rating (IDR) to Restricted Default from ‘C’. Ghana’s Long-Term Foreign Currency (FC) IDR remains at ‘C’ given the government’s suspension of payments on selected external debt pending a restructuring of such obligations.

So far, Ghana has only partially completed the domestic-debt part of the exchange plan, and has already missed a self-imposed deadline to restructure its bilateral liabilities by the end of February.

S&P estimates that private creditors may have to write off as much as 50% of their holdings — far higher than the 30% the government initially suggested.

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