US$3.025-bn Eurobond reduces Ghana’s cost of debt funding

The challenge

The Republic of Ghana needed to lower the average cost on the commercial portion of its public debt profile which had risen due to outlay of funds in response to the COVID-19 pandemic and one-off structural interventions related to bailout the financial sector and clean-up energy sector arears to put the economy on firmer footing. Ghana’s local debt carries a relatively high price compared to peers, so as part of their debt management strategy, the Ministry of Finance was seeking efficiencies to lower that cost and saw an opportunistic window to refinance some of the short-dated expensive local debt with less expensive term funding from the global markets off the back of a more stable currency and domestic macroeconomic environment.

The RMB solution

As a long-term partner to Ghana, RMB was invited to participate in the RFP. The successful outcome can be attributed to RMB’s commitment to Ghana through it’s on the ground presence, as well as RMB having a leading Debt Capital Markets Team and the continuous investments we have made into our global credit distribution platforms enabled us to facilitate the transaction in under a month.

Our solution was to guide them on strategy to achieve their size and price objectives despite the difficult market conditions at the time, resulting in the arrangement of a US$3.025-bn Eurobond which included a novel zero-coupon tranche which is another step towards achieving Ghana’s objective to create additional fiscal space to help Build Back Better post Covid-19 impact in the economy.

The expert advice of the RMB DCM team also enabled the market astute Government of Ghana deal team to properly position to raise the required funding despite the volatile market backdrop and investor concerns about locking-in duration in a rising inflation environment.

The roadshow and bookbuild were facilitated through digital channels which assisted issuers and investors to connect, despite the lockdown conditions.

How did this enable the client?

The Eurobond provides more affordable funding which should enable Ghana to lower the cost of domestic debt, help create more fiscal room and enable Ghana to execute on its 2021 budget for important services to the people of Ghana.

Ghana was able to print a record deal with numerous firsts and highlights, such as:

• Record deal size for the issuer and largest in Sub-Saharan Africa in over a year;
• First Zero-Coupon transaction on the continent giving the issuer fiscal space by not incurring coupons;
• First quadruple-tranche transaction on the continent, with all tranches benchmark size retaining liquidity;
• Intraday compression in yield of 25bps on each conventional tranche and 3 points higher in the zero coupon (compression in of 100bps+)

Our agility in turning the transaction around within a month enabled Ghana to navigate the choppy waters in the market and achieve their objectives in terms of their debt management strategy. The services of RMB’s leading Debt Capital Markets Team, based in London, a key financial hub, and remains available to African issuers to help them direct capital into the continent for investment, growth and development.