Fitch downgrades Ghana’s creditworthiness to deeper junk status; assigns ‘Restricted Default’ to government bonds

February 15, 2023 / Comments (0)

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International ratings agency, Fitch Ratings, has downgraded Ghana’s creditworthiness to further junk status.

In its latest report on Ghana, it said “Fitch Ratings downgraded Ghana’s Long-Term Local Currency (LC) Issuer Default Rating (IDR) to Restricted Default (RD) from ‘C’.”

It attributed the downgrade to the decision by government to embark on the debt exchange programme and the recent default on local bonds that matured on February 6, 2023 and another one which is due for payment this week.

“The downgrade of Ghana’s local-currency denominated debt follows the completion of a domestic debt exchange offer by the Republic of Ghana. This transaction is an element of the recovery programme for which the government is seeking the support of the International Monetary Fund for a 3-year Extended Credit Facility (ECF) of about $3 billion”.

Fitch also affirmed Ghana’s Long-Term Foreign Currency (FC) IDR at ‘C’, saying, “Fitch typically does not assign Rating Outlooks to sovereigns with a rating of ‘CCC+’ or below”.

Foreign-currency debt not affected

Fitch downgraded the Long-Term Foreign Currency Issuer Default Ratings (IDR) to ‘C’ from ‘CC’ on December 21, 2022 following the government’s announcement of a suspension of payments on selected external debt.

Ghana subsequently asked official creditors for a restructuring of its external debt under the G20 Common Framework.

A Eurobond coupon payment, due on January 18, 2023, has not been honoured.

“Fitch also affirmed the LT FC IDR at ‘C’, but will downgrade it to ‘RD’ after the end of the grace period for this coupon payment that expires on Feb. 17, 2023”, it said

Partially guaranteed notes not affected

Fitch downgraded the issue rating on Ghana’s U.S. dollar-denominated notes due October 2030 to ‘CC’ from ‘B-‘ on December 21, 2022.

The notes benefit from a partial credit guarantee (PCG) backed by the International Development Association for scheduled debt service payments up to 40% of the original principal.

Fitch had assigned a multiple-notch uplift to the notes to reflect its view that the PCG reduces the bonds’ potential for default and increases the possible recovery in the event of issuer default. The ‘CC’ rating for the partially guaranteed U.S. dollar-denominated notes due October 2030 has been affirmed.


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