Gov’t Defends High Eurobond Yield

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Ghana’s Minister of Finance Seth Terkper says the claims that the 10.75% yield investors demanded for Ghana’s fourth Eurobond is on the high side.

Ghana on Wednesday successfully issued its fourth Eurobond after cutting back on its initial figure to get a better rate for the bond.
The 10.75 percent’s yield on the bond, according to analysts is still much higher than government’s initial target of 8.5 percent.

It is also higher than the previous one which had coupon rates of 8 and 8.5 percent for its two billion dollar- bond issued.

The World Bank’s guarantee of 400 million dollars on the bond as well as plans by government to set up an infrastructure fund to use proceeds from the country’s Eurobonds played a key role in Ghana getting that yield that is 10.75 percent.

Commenting on the high yield of the Eurobond, Mr. Terkper said Ghana remains the only sub-Saharan African country that is able to raise a fifteen year bond at such a yield and asked critics not to compare a 10 year bond to the current 1 billion dollar 15 year Eurobond.

“They were comparing a 15 year bond to a 10 year bond that is comparing apples to oranges. I think they would have served the Ghanaian public well if they have checked. There is a sub – Saharan country that was able to raise a 15 year bond in the first place and was able to roll it at a lower yield and thirdly under the circumstances which the markets find itself now. Now we are going to use the bond to refinance 90 day bill”.

He further added “I think the experts should ask and it will benefit them if we discuss whether if it is prudent even at 10 percent to refinance the 3year bond that is due for example in three weeks time at 10 percent borrowing or to refinance it domestically which is what we would have done.

Also whether it would have been better to refinance it at 7 percent increase domestic interest rates and crowd out private capital”.

Ghana cut the parliament approved figure of 1.5 billion dollars to 1 billion dollars. Explaining why the country cut back on the figure Seth Tekper said “I don’t think we should put a negative spin on every little element of the bond issue.

Even in the Ghanaian market when IPOs’ are done, the pricing is not done immediately after the road show; normally the tender is opened for a week or two so the fact that we priced our last two bonds just after the road show does not mean that every year when you go to the market you should price the bond immediately after the road show”.

“We did not want to rush and therefore the statement we put out was careful in saying that we were prolonging the period for the pricing. But too many people created panic including the experts who indicated that the bond had failed”.

By GB&F

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