{"id":394571,"date":"2017-06-06T14:52:18","date_gmt":"2017-06-06T14:52:18","guid":{"rendered":"https:\/\/ghana-mma.com\/2017\/06\/06\/gh%c2%a210bn-bond-faces-investor-fright\/"},"modified":"2017-06-06T14:52:18","modified_gmt":"2017-06-06T14:52:18","slug":"gh%c2%a210bn-bond-faces-investor-fright","status":"publish","type":"post","link":"https:\/\/www.ghanamma.com\/2017\/06\/06\/gh%c2%a210bn-bond-faces-investor-fright\/","title":{"rendered":"GH\u00a210bn bond faces investor fright"},"content":{"rendered":"<p><\/p>\n<div id=\"\">\n<p>Fears of investor fright, caused by the controversy surrounding the recent US$ 2.25 billion bond, may hamper the GH\u00a210 billion bond that the government intends to issue next year to repay the energy sector debt.<\/p>\n<p>Investor fright for the bond could translate into dampened appetite for the issue, a high coupon rate or both.<\/p>\n<p>&#13;\n\t\t\t<\/p><\/div>\n<div id=\"\">\n<p>An economic analyst at Databank, Mr Courage Kwesi Boti, told the GRAPHIC BUSINESS that concerns about the country\u2019s future bonds being hampered by the recent controversy had merit, considering the low demand for the government\u2019s three-year bond which was just issued last week.<\/p>\n<p>&#13;<\/p>\n<p>He said the low patronage of the bond provided some basis that the recent controversy over the US$ 2.25 billion bond may have affected the demand for the country\u2019s bonds.\u00a0<\/p>\n<p>&#13;<\/p>\n<p>\u00a0 \u00a0<br \/>\u201cPer the issuance calendar, the target for the three-year bond was GH\u20b5800 million but the total bids received was only GH\u20b5729 million. My thinking is that given the rhetoric that investor confidence has improved and the drastic demand for short-term yields, demand for the three-year bond should have exceeded what we got,\u201d he stated.<\/p>\n<p>\u201cSo on that score, arguments that the controversies surrounding the recent US$ 2.25 billion bond could be undermining demand may have some merit,\u201d he added.<\/p>\n<p>&#13;<\/p>\n<p>A Minority Spokesperson on Finance in Parliament, Mr Isaac Adongo, had earlier raised concerns that the controversy had dampened the confidence of investors in the country\u2019s bond and this may persist till next year when the country issues the energy bond.<\/p>\n<p>&#13;<\/p>\n<p>Speaking in an interview with the GRAPHIC BUSINESS, Mr Adongo expressed fear that this investor fright would lead to the inability to raise the required money, and even if they should succeed, it would be at a very high interest rate.<\/p>\n<p>He said the government would even struggle to get the market to respond to the bonds and \u201cthis is why the same people whose turnaround time for raising a similar amount of US$2.25 billion was two days are now relying on the credibility of a transaction advisor for the energy bond and this is to whip confidence in the investing public.\u201d<\/p>\n<p><strong>Lot of things may affect energy bond<\/strong><\/p>\n<p>Mr Kwesi Boti, however, pointed out that with regard to the energy bond, a lot of things could affect the demand for it, which might not necessarily be the controversies surrounding the country\u2019s recent bond.<\/p>\n<p>\u201cThe proposed bond is in a Special Purpose Vehicle (SPV) and not on government\u2019s books. It is backed by cash flows from the Energy Sector Levy (ESL) which could be affected by government policy and this will be a debut on our market,\u201d he stated.<\/p>\n<p>&#13;<\/p>\n<p>He said that could affect the demand for the bond and would, therefore, require strong marketing from the book runners if it would succeed.<\/p>\n<p>Energy bond will make energy sector viable<\/p>\n<p>Mr Kwesi Boti believes issuing a bond to repay the energy debt now is the best option as it will free up the books of the energy sector SOEs to be able to borrow to expand and improve their efficiency.<\/p>\n<p>&#13;<\/p>\n<p>He said that would also help free up the books of the banks, reduce their non-performing loans ratio and position them to give out more credit to the private sector.<\/p>\n<p>\u201cThere may be different approaches to solving the problem but this government is looking at paying the debt at once. Paying it over a time using the ESL means the problems will still exist in the banking sector and there will still be challenges with the banks giving out loans and credit to the private sector. It means the challenges with the energy sector SOEs will also exist,\u201d he noted.<\/p>\n<p>Touching on the interest rate, Mr Kwesi Boti said taking into consideration the cedi which had depreciated by about 14 per cent in the last five years, the interest that government was paying to the banks as interest on the dollar loans was around 22 per cent and not 8.5 per cent.<\/p>\n<p>&#13;<\/p>\n<p>\u201cSo if they are able to raise a cedi bond at even around 20 per cent, then that will be better,\u201d he added.<\/p>\n<p><strong>Bond unnecessary<\/strong> <\/p>\n<p>Mr Adongo, who is the Member of Parliament for Bolga Central, however, stated that it was not necessary for the government to issue a bond to repay the energy sector debt, when there was already an existing vehicle that was doing so, which is ESL.<\/p>\n<p>&#13;<\/p>\n<p>\u201cWhy do you have to borrow another GH\u20b510 billion that will further increase our public debt when we have a regular flow of income that will solve the debt crisis in the energy sector in four to five years?\u201d<\/p>\n<p>\u201cThe previous government has restructured the energy sector debt with the banks with an agreement that resulted in the reduction of interest rates. For dollar denominated loans that the State Owned Enterprises (SOEs) in the energy sector took, the interest rate reduced from 12 per cent to 8.5 per cent. The cedi denominated loan which were between 28 and 30 per cent dropped to about 22 per cent,\u201d he said.<\/p>\n<p>For the 15-year bond to be appropriate, he said the government had to be looking at an interest rate that mirrored the negotiated interest rates that the previous government had with the banks. <strong>\u2014 GB<\/strong><\/p>\n<p>&#13;<\/p>\n<p>\t\t\t\t\t\t\t\t\t\t\t\t\t              <!-- new position --><br \/>\n          <!-- new position end -->\n\t\t\t<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Fears of investor fright, caused by the controversy surrounding the recent US$ 2.25 billion bond, may hamper the GH\u00a210 billion bond that the government intends to issue next year to repay the energy sector debt. Investor fright for the bond could translate into dampened appetite for the issue, a high coupon rate or both. &#13; [&hellip;]<\/p>\n","protected":false},"author":0,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-394571","post","type-post","status-publish","format-standard","category-business"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.8 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>GH\u00a210bn bond faces investor fright - Ghanamma.com<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.ghanamma.com\/2017\/06\/06\/gh\u00a210bn-bond-faces-investor-fright\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"GH\u00a210bn bond faces investor fright - Ghanamma.com\" \/>\n<meta name=\"twitter:description\" content=\"Fears of investor fright, caused by the controversy surrounding the recent US$ 2.25 billion bond, may hamper the GH\u00a210 billion bond that the government intends to issue next year to repay the energy sector debt. 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