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8/12/2019 Eurobond Press Briefing Aug 12 Press Version
http://slidepdf.com/reader/full/eurobond-press-briefing-aug-12-press-version 1/17
Press
Conference on
12 August2013
1
THE GHANA 2013
EUROBONDTRANSACTION
8/12/2019 Eurobond Press Briefing Aug 12 Press Version
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Diversify Sources of Funding
Consolidation of middle income status
Decreasing flow of concessional financing
Reduce the debt service cost and rollover risk of the Ghana
2017 bond
Reduce the cost of government financing
Current cost of domestic financing 19-21%
Improve tenor/length of financing the capital budget
Compare tenor of 3 or 5-year (or proposed 5-year) domestic bonds to
the 10-year tenor for Sovereign Bond
2
GOALS
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3
PLANNED USE OF PROCEEDS
INDICATIVE AREAS USD (MILL) % GHS %
Counterpart funding for approved projects 102 10% 204 10%
New Projects in 2013 Budget 307 31% 614 31%
Early Redemption of Ghana 2017 Eurobond 250 25% 500 25%
Refinancing of maturing Domestic debt 341 34% 682 34%
Total 1,000 100% 2,000 100%
AMOUNTS
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Budget Proposal (March 2013)
Cabinet approval (April 2, 2013)
Parliamentary Approval (26 June 2013)
Recruitment of transaction advisors (June 2013)
Preparation of transaction documents (June -July 2013
Marketing of Bond (road show) (22-25 July, 2013)
Launch of Transaction (25 July 2013)
Pricing (26 July 2013)
Launch of bond exchange offer (26 July 2013)
Issue & Closing (7 August 2013)
4
THE PROCESS
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Lead Managers (Citigroup, Barclays)
Co-Managers (EDC Stockbrokers, Strategic African Securities)
International legal counsel (Denton’s)
Local legal counsel (JLD & MB)
Government of Ghana Transaction Committee (MoF, Bank of Ghana)
5
TRANSACTION TEAM
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Ghana’s investor roadshow was designed to be broad-reaching
The Republic’s had been absent from the international bond markets forthe last six years
There was a non-deal road-show in April 2013 (part of IMF/WB Springmeetings) and some periodic meetings with some investors
Two teams travelled to London, Frankfurt, Munich, SamFrancisco, Los Angeles, Bo ston and New York
Ghana met with 58 investors via one-on-one meetings, groupevents or conference calls
The Ghana team was represented by
Minister of Finance
Deputy Minister of Finance
Governor of Bank of Ghana
Deputy Governor of Bank of Ghana
Additional officials from both the Ministry of Finance Bank of Ghana
6
ROAD SHOW
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ISSUER RATING SIZE
( MM)
ISSUE
DATE
MATURITY
(YRS)
Coupon
(%)
YIELD AT
ISSUE (%)
Ghana B1/B+/B 1,000 Aug 2012 10 7.875 8.000
Nigeria BB-/BB- 500 July 2013 5 5.125 5.375
BB-/BB- 500 July 2013 5 6.375 6.625
Rwanda B/B 400 May 2013 10 6.625 6.875
Zambia B+/B+ 750 Sep 2012 10 5.375 5.625
Note differences
among countries
Ratings
Timing or dates Size of offers
Blend of offers
(Nigeria)
Tenor of offers
Market
conditions
Processes
9
ANALYSIS OF RECENT AFRICAN SOVEREIGN
ISSUES
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Nigeria
Higher credit rating
Shorter maturity (5-Year)
Rwanda
Good market timing (May 2013)
Before Bernanke’s announcement (Wednesday June 19) of likely
tapering of quantitative easing resulting in interest rate hikes and
high market volatility
Zambia
Good market timing (September 2012)
10
COMPARISON OF COSTS
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ISSUER Coupon (%) MATURITY YIELD
Ghana 8.500 2017 5.65
Ghana 7.875 2023 8.06
Nigeria 5.125 2018 4.52
6.375 2023 5.97
Rwanda 6.625 2023 8.13
Zambia 5.375 2022 7.03
Secondary market tradingindicates that Ghana’s bondis well priced
Rwanda (B) is trading at ahigher yield than Ghana
(B/B+) (8.13% versus8.06%)
Therefore Rwanda is NOTmore creditworthy thanGhana
Zambia is trading at a
higher yield compared toGhana 2017 (because ofmaturity difference – Ghana 2017 has shortermaturity)
11
SECONDARY MARKET QUOTES
AUGUST 7, 2013
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INVESTORS WHO BOUGHT OUR BONDS
Summary of Order Book
Orders ( m) 2,157
# of Orders 174
Allocations ($m) $750
Allocations (# of
investors)
158
Allocations to
Local Institutional
Investors ($m)
$16.5
U.S.A.60%
U.K.
21%
Europe15%
Asia
2%
Other
2%
Allocations by Investor Location
12
8/12/2019 Eurobond Press Briefing Aug 12 Press Version
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Ghana became the first Sub-Saharan African country
(excluding South Africa) to use the Eurobond market to
manage its overall debt by:
Reducing cost
Reducing the risk of rollover Ghana 2017 is a bullet bond repayable in October 2017
Risk of high interest rate or uncertain market access
Prudent to initiate an orderly retirement to reduce market
risks of rollover
13
MANAGING OUR DEBT MORE EFFICIENTLY
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On 26 July 2013, one day after pricing of the new US$750m
7.875% notes due 2023 (the “New Notes”), Ghana launched
an invitation to holders of Exis ting Ghana 2017 Notes to
exchange their holdings for up to US$250m of new 7.875%
notes due 2023 US$356m of Existing Notes were validly tendered
This translated into and Exchange of $219 million face value
of the Ghana 2017
The difference in interest costs between the Ghana 2017 bond
(8.50%) and the new Ghana 2023 Bond (7.875%) translatesinto an estimated annual savings of $1.375MM
14
REDUCING THE COST AND ROLLOVER RISK
OF THE GHANA 2017 BOND
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Ghana achieved its financing objectives with the transaction
Extended Ghana’s maturity profile
Reduced the rollover risk of the Ghana 2017 bond
Raised cost effective funds to refinance high-cost domestic term debt
Set a new benchmark and achieved a lower coupon than Ghana’sdebut 10-year USD bond
Listing of notes on the Ghana Stock Exchange, facilitating access for
local investors.
First sub-Saharan African country (excluding South Africa) to listed its
Eurobond on the local stock Exchange
Ghanaian institutional investors (banks, insurance companies, pension
funds) participated in the offer.
16
CONCLUSION
8/12/2019 Eurobond Press Briefing Aug 12 Press Version
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Debt policy will be guided by the principle of financing capital
expenditures with domestic and international long-term debt
(the upcoming debut issue of a domestic seven -year bond
reflects this policy)
Project specific bonds will be raised for self -financing projectswhile general conventional bonds will be raised for other
capital expenditures
Ghana will continue to source concessional financing for
social infrastructure.
17
LOOKING AHEAD