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Ghanaian Banks are Holding Out for Better Terms in a Domestic Bond-exchange Program

No bank will make a profit in 2022 if they accept the new bonds offered under the exchange, and some face collapse, according to two people familiar with ongoing talks between the government and lenders, who asked not to be identified because they’re not authorized to speak publicly. Ghana is restructuring most of its public debt, estimated at $39.2 billion as at the end of September, to qualify for a $3 billion bailout from the International Monetary Fund. Local bondholders have been asked to voluntarily exchange cedis of debt for new bonds that will pay zero interest in 2023 and less than existing securities in ensuing years. The repayment of principal for the new bonds won’t start until 2027 and ends in 2038, under current terms. Banks are negotiating for principal repayments to start by 2026 and end around 2033, the people said. Banks, which own about a third of the existing securities, will make losses on the difference between the net present value of their current holdings and the new bonds, the people said. They will have to make provision for the losses in their books to satisfy accounting standards, they said.