Ghana Eurobond recovery value upgrades by Morgan Stanley after debt restructuring succeeds.
Morgan Stanley, the investment bank, has updated its “recovery value” forecast for Ghana defaulted dollar-denominated government bonds to $46 from a previous forecast of $41.
This change comes after the Ghanaian government restructured its local currency debt, with an 85% participation of “eligible” bonds, equating to 64% of the 130 billion Cedis ($10.8 billion) originally slated for restructuring. Despite the economic challenges, Morgan Stanley remains positive on Ghana hard currency bonds and has maintained its favorable stance on them.
The bank now estimates that the domestic debt exchange will save the Ghanaian government about $7.8 billion from 2023 to 2028, compared to a previous prediction of $7 billion. However, the bank has revised down its “exit yield” forecast for Ghana foreign currency bonds to 13-14% from around 15%.
The bank also predicts that the net present value (NPV) loss for domestic bonds would be 51%, compared with an average of 21% in other local debt restructurings over the last 15 years in countries like Jamaica, Nicaragua, and Cyprus.
Ghana Finance Minister, Ken Ofori-Atta, has informed parliament that substantive discussions with international bondholders would occur in the next few weeks. Ghana has approximately $13 billion in dollar-denominated international bonds, or “Eurobonds.” These bonds were trading between 37 cents and 41 cents on the dollar on Friday.
To put it simply, Morgan Stanley, an international investment bank, has declared that the value of Ghana’s dollar-denominated government bonds has increased since the government restructured its local currency debt. The bank has credited this decision for the rise in bond value.
Additionally, the bank anticipates that the government will save approximately $7.8 billion from 2023 to 2028 as a result of the restructuring.