Title: Ghana Lures Bids of $2.2 Billion as Demand Doubles Debt Offered
By Moses Mozart Dzawu & Chris Kay - Jul 26, 2013
Demand for Ghana’s bid to raise $1 billion on international capital markets amounted to more than twice that of the debt offered, according to Citigroup Inc., which helped arrange issuance.
The order book amounted to about $2.2 billion, Nicholas Samara, the London-based vice president of Central and Eastern Europe, Middle East and Africa, at Citigroup, said by phone today. The government issued $750 million of 10-year notes at 7.875 percent and will next Friday exchange an additional $250 million of the bonds for existing debt maturing October 2017, Sam Mensah, a consultant for Ghana’s Finance Ministry, said by phone from New York.
“This financing is strategically put in place to support the country to continue its trajectory of economic growth,” Citigroup’s Samara said. The coupon rate compares with 6.63 percent in Nigeria’s sale of 10-year bonds on July 2 and 6.875 percent Rwanda got in an April issue.
The bond sale in the world’s second-biggest cocoa producer took place as African nations tap appetite for assets from the world’s fastest-growing region after developing Asia. Like Rwanda, Ghana is rated five steps below investment grade at B by Standard & Poor’s, compared with BB- for Nigeria, which is three steps away. Ghana, which became the first sub-Saharan African nation outside South Africa to sell Eurobonds in September 2007, forecasts an expansion of 8 percent this year in the $41 billion economy.
The 2023 bond will be listed on Ghana Stock Exchange (GGSECI) and the Irish Stock Exchange, making it the first Eurobond to be listed on a local market in sub-Saharan Africa, outside of South Africa, the ministry said in a statement on its website. The funds will also be used for capital projects approved in the 2013 budget and refinancing the 2017 debt to lower its cost of borrowing, it said.Yields on the $750 million 2017 debt fell two basis points, or 0.02 percentage point, to 5.95 percent as of 1:01 p.m. in London. The yields have jumped 108 basis points this year, compared with a 122 basis-point increase in emerging-market bonds, JPMorgan Chase & Co. data show.
Ghana’s budget deficit jumped to 12.1 percent of gross domestic product in 2012 from 4.3 percent the previous year as the government boosted salaries for civil servants. The Finance Ministry is forecasting the gap will narrow to 9 percent this year. In the first four months of 2013, the shortfall was 3.8 percent of GDP, compared with a forecast of 3 percent, the central bank said in May.
Paulina says: Borrow, Borrow, Borrow ……….which lucky generation will have to pay this back… And will this money really go where it’s supposed to????