Transcript Sovereign Participation in International Bond Market: The

Sovereign Participation in
the International Bond
Market: The Ghana Case
Sam Mensah
Technical Advisor
Ministry of Finance & Economic Planning
Ghana
Annual Conference of ASEA
October 30, 2007
1
OUTLINE
BORROWING
STRATEGY
GHANA’S
STRENGTHS
SUCCESSFUL
ISSUING
STRATEGY

Why Ghana wanted to
issue bonds on the
international capital
market

Which factors helped
Ghana to tap
international market

How Ghana managed
a successful Issue
2
Why Eurobond?


Historical over reliance on concessional debt from multilateral
sources especially IMF, World Bank
Concessional Debt






Long gestation period – conception to disbursement can take up
to 3 Years; delays can be very costly in economic terms
Amounts too small to meet infrastructure requirements for
accelerated growth
Conditionalities may not be consistent with national priorities
High transaction cost – appraisal, review missions, monitoring
and evaluation tie up significant national resources
But terms are generous
Need to diversify funding sources to mitigate disadvantages of
concessional debt
3
Ghana’s Strengths





Reforms undertaken since 2000 have transformed
Ghana’s economic condition and prospects
Stable political conditions needed for reforms to
succeed
Support from Ghana’s international partners have
reinforced the positive steps taken at home
Macroeconomic and social indicators are pointing in
a positive direction
Vulnerabilities remain but the strategy is in place
and the foundation has been laid for Ghana’s
ascent to middle income status by 2015
4
Ghana's Debt Dynamics
TOTAL PUBLIC DEBT OUTSTANDING
2002
Domestic Debt
External Debt
Total Public Debt
1,656.27
6,491.31
8,147.58
2003
1,539.78
8,023.67
9,563.45
2004
2005
(US$ millions)
1,867.53
1,997.35
6,777.89
6,887.80
8,645.42
8,885.15
2006
3,133.31
2,782.24
5,915.55
30-Jun-07
3,754.63
2,664.99
6,419.62
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Improved external accounts
Forex Rate vrs USD
18.00
16.00
14.00
% Change
12.00
10.00
8.00
6.00
4.00
2.00
2002
2003
2004
2005
2006
2007
External debt service chart
6
18
Comparable Rated Sovereign
Peer Group (2006)
Debt Management Comparables
120%
100%
80%
60%
40%
20%
0%
Ghana (B+/ - /B+)
Kenya (B+/ - / - )
Ukraine (BB-/B1/BB-) Vietnam (BB/Baa3/BB-)
Jamaica (B/B1/B+)
-20%
Real GDP Growth %
General Govt Debt % of GDP
Current Account Balance % of GDP
Gross External Debt % GDP
 Ghana performs well against its rated sovereign peers
Source: Fitch and EIU Reports
5
7
Successful issuing strategy for
a debut issue

Elements of successful issuing
strategy




Political will at the highest levels
Competent transaction team
Structuring the Offering
Telling the Ghana Credit Story
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Transaction Team

Lead Managers


Co-managers (all Ghanaian)



International: DentonWildeSapte (Lead); Cravath,
Swaine & Moore (U.S, Law)
Local: ILC
Lead Managers Counsel



Databank, EDC Stockbrokers, New world Investments
Issuers Counsel


Citigroup, UBS
International: Clifford Chance
Local: JLD & MB
7-member MOFEP/BoG Support Team
9
Timeline /Milestones
Jul 2006 – Jan
2007
Feb 6
Feb-Jun 2007
July 9
July 9 -11
July 20
July 30
Aug 15
Sept 3-14
Sept 17-28
Oct 1-5
Discussions with investment bankers
and receipts of Expressions of Interest
– EOI visits from 13 Investment
Banks
Cabinet approval to proceed given
RFP process; selection of Lead
Managers, Co-managers international
and local counsel; mandates
negotiated and signed
Kick-Off meeting in Accra
Due Diligence Meetings
Fiscal Agent Appointed
Parliamentary approval for
transaction
Draft Preliminary Prospectus to UK
Listing Authority
 Road show materials finalized
 All agreements, legal
documentation finalized
 Deal Announced
Road show, book building, pricing
Closing and settlement
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Transaction Highlights
On the 27th of September 2007, Citi (and UBS as joint bookrunners) priced the landmark US$750 million
10-year inaugural international bond issue for the Republic of Ghana, despite very volatile prevailing
market conditions. The transaction generated in excess of US$3 billion in global demand with 158
investors participating in the orderbook.
Final Terms: New Issue
1
Issuer:
THE REPUBLIC OF GHANA
Ratings:
B+ stable (S&P), B+ positive (Fitch)
Format:
Reg S/ 144A
Amount:
US$750 million
Coupon:
8.50%
Issue Price:
100%
Pricing:
Mid-swaps + 325 bps
Maturity:
October 4, 2017
Settlement:
October 4, 2007
Benchmark reference:
UST 4.75% Aug 2017
Spread to benchmark:
387 bps
Listing:
London Stock Exchange
Joint Bookrunners:
CITI, UBS
Co-Managers:
EDC Bank, Databank, New World (Ghana)
Transaction Summary
– On September 27th 2007, the Republic of Ghana
issued its debut US$750 million 10-year Reg S/
Rule144A bond. This transaction was priced
following a 6-day investor roadshow in the US
(New-Port Beach/LA, NYC and Boston) and
Europe (London, Frankfurt/ Munich and Zurich).
– The orderbook grew in excess of US$3 billion,
this was over 4 times subscribed with 158
orders from investors globally.
– The sovereign issuer was able to achieve the
maximum size of US$750 million that it required
at the tight end of the initial guidance of 8.50% to
8.75% thanks to a high quality and well-diversified
order-book.
Bookbuilding Evolution
The international marketing effort through the US and European roadshow paid off, evidenced by the the
diversity of the orderbook and the high quality of the accounts.
Roadshow schedule
Timeline
Sept 17
Announcement
Sept 19 Wed
Newport Beach/ LA
Sept 20 Thur
NY
Sept 21 Fri
Boston (Global Conference Call)
Sept 24 Mon
London
Sept 25 Tue
Frankfurt/ Munich
Sept 26 Wed
Zurich
Sept 27
 Pricing
Marketing the Transaction
Key Selling Points
2
Bloomberg Presentation
Offering Circular
Sales Force Memo
Book Building Process
In spite of the market volatility and heightened risk aversion sentiment, Ghana was able to achieve more
than 4 times subscription, with investors eager to take part in a transaction by a rare Sovereign Issuer.
Order Book Analysis
Orders Size
> US$50m
11%
Books Closed
Total Orders:
158
3,500
< US$3m
21%
3,000
Orders US$ (million)
US$10m-US$50m
42%
2,500
Books Open
$3.3bn
2,000
Roadshow
Commences
1,500
Transaction Priced:
Mid-swaps + 325 bps
1,000
500
Deal
Announced
$750m
Initial
Guidance Set
0
Sept 14th
3
Sept 19th
Sept 26th
8:30 AM
Sept 26th
3:30 PM
Sept 27th
2:00 PM
US$3m-<US$10m
26%
Investor Distribution
158 accounts participated in the deal with the majority of the issue sold into the US and Europe. The final
order book was above US$3 billion with investment/ asset managers representing 65% of the investors
along with a significant participation by hedge funds.
Orders Geographic Distribution
Asia
1%
Europe
23%
Orders by Investor Type
Private Banks/
Insurance Companies/
Pension Funds
7%
Hedge Funds
22%
USA
45%
Investment / Asset
Manager
54%
Banks & Trusts
17%
UK
31%
Allocations Geographic Distribution
Asia
1%
Europe
29%
Allocations by Investor Type
Private Banks/
Insurance Companies/
Pension Funds
9%
Hedge Funds
17%
USA
42%
Banks & Trusts
9%
UK
28%
4
Investment / Asset
Manager
65%
Press Coverage: The Republic of Ghana
Ghana makes international bond debut
The Republic of Ghana on
Thursday became the first west
African sovereign state to enter
the international bond markets,
selling a benchmark issue to raise
$750m.
The deal met almost $3bn of
demand and could, bankers say, be
the first of a number from African
countries that have benefited from
debt relief.
The sale underscores a continuing
robust appetite among some
investors for high-yielding assets,
particularly in emerging markets - in
spite of the turmoil that has affected
sentiment in the wider financial
markets.
The 10-year bond was sold at par to
yield 8.5 per cent, at the tight end of
initial price guidance, according to
Citigroup and UBS, which managed
the deal.
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Bankers said the bonds went to a
wide range of investors, with about
40 per cent going to the US, 36 per
cent to the UK and the rest to
Europe.
"We have been preparing for this day
for the past two years, and the
process has been hard work," said
Kwadwo Baah-Wiredu, Ghana's
minister of finance and economic
planning. "We have repositioned
Ghana from being a very highly
indebted country to one with a
healthy, expanding economy.
"We are the first African country
other than Egypt, Morocco and
South Africa, which has made it on
to the international market."
The minister said the proceeds of the
bond would be used to improve
Ghana's infrastructure, including the
building of roads and the energy
sector.
"Ghana has emerged as a trend
setter in sub-Saharan Africa, having
entrenched political stability and put
in place macroeconomic policies that
have secured it extensive external
debt relief under a series of
international creditor-driven
initiatives," Paul Rawkins, senior
director in Fitch's Sovereign rating
team in London, recently said.
A number of other African
governments including Nigeria,
Kenya and Zambia are considering
issuing sovereign debt on the
international bond markets.
Ghana is rated B+, in the speculative
grade category, by Standard &
Poor's and Fitch.
Published September 27, 2007
By Joanna Chung
Press Coverage: The Republic of Ghana (cont’d)
Ghana sees huge demand for debut 10-yr Eurobond
Ghana sold a $750 million Eurobond
Thursday, with order books testifying
to abundant appetite for the debut
bond from the West African country
and possibly for future issues from
the continent.
he added. The minister said the
proceeds of the bond would be
used to improve Ghana's
infrastructure and pledged to
continue with reforms that have
helped speed up economic growth.
The 10-year dollar bond was sold at
par to yield 8.5 percent, the tight end
of the guidance given on
Wednesday, lead managers Citi and
UBS said. The book size was almost
$3 billion with about 40 percent
placed to U.S. investors, 36 percent
with UK investors and the rest in
Europe, officials with the banks said.
About 158 accounts bought into the
deal, they added.
Ghana is rated 'B+' by Standard &
Poor's and Fitch, a distinctly
speculative grade.
The two deals how that in spite of
the global liquidity squeeze that is
forcing central banks to pump in
billions of dollars into money
markets and make emergency loans
to banks, there is cash on hand to
invest in high-yield assets.
"There is appetite for sovereigns,"
said Kaushik Rudra, emerging debt
strategist at Lehman Brothers.
The Ghana deal is also significant
"People are differentiating between
in that it marks the first foray into
corporates and sovereigns and have
global bond markets for a country
more confidence in the sovereign
that had its debts written off as part
outlook than the corporate outlook.“
of a historic 2005 $40 billion debt
relief effort for Highly Indebted
Analysts say the order book testifies
Poor Countries (HIPC).
not only to the attractiveness of the
8.5 percent yield but also to growing
"This is the first instance when a
"We are very happy. This is the first
confidence in Ghana's economy,
country post-HIPC is tapping
African country other than Egypt,
which the finance minister said
international capital and we expect
Morocco and South Africa, which
would grow at 6.5 percent this year
it to be the first of many bond
has made it on to the international
despite floods and drought.
issues from African countries," said
market," Ghana's finance minister
Razia Khan, economist at Standard A recent oil discovery may help
Kwadwo Baah-Wiredu, in London for
Chartered Bank in London.
consolidate growth. World prices for
the bond sale, told Reuters.
cocoa and gold, its other main
Ghana's success comes a day
"We had investors from all over the
exports, are high.
after Turkey sold $1.25 billion in
world and it shows Ghana's story is
2018 Eurobonds, which were three "The economy stands out because
good. I hope other African countries
times oversubscribed.
of the speed of
will be able to succeed as well,"
economic transition... it has
successfully reduced the size of the
fiscal deficit and it has the benefits
of political stability in its favour
despite being in a difficult
neighbourhood," Khan added.
Stuart Culverhouse, head of
research at Exotix, a subsidiary of
ICAP, said dollar debt of the kind
issued by Ghana and Turkey was in
short supply and an 8.5 percent
yield was attractive.
"I'm not surprised it was
oversubscribed so heavily," he said.
"A new issue from Africa will get into
benchmark indices and people will
be buying it for tracking purposes as
well."
Meanwhile, Ghana's cocoa board
raised a $900 million trade finance
facility, the largest structured soft
commodity syndicated deal in Africa,
the organisers of the loan said.
Published September 27
By Sujata Rao
6
Press Coverage: The Republic of Ghana (cont’d)
Ghana's 6.5 percent 2007 growth target achievable
Ghana's finance minister
Kwadwo Baah-Wiredu said
on Thursday that his
country's 6.5 percent
economic growth target was
achieveable despite recent
floods in the West African
country.
"Earlier we had drought,
now rains have come and
we have floods but we are
seeing it as an opportunity
and a challenge. Agriculture
may be affected but 6.5
percent growth will be
achievable as we have done
a lot on the industrial side
and mining and construction
are also doing well," he told
Reuters.
7
The minister was speaking
after Ghana successfully
issued a debut Eurobond for
$750 million that was almost
four times oversubscribed.
"We are very happy. This is
the first African country
other than Egypt, Morocco
and South Africa which has
made it on to the
international market and it
shows the Ghana story is
good," Baah-Wiredu said. "I
hope other African countries
will be able to succeed as
well."
Baah-Wiredu said a recent
oil find in Ghana by Tullow
Oil contained at least 1.3
billion barrels and likely
more. He said it was in
excess of the original
estimate of 900 million
barrels.
"The prospectus indicated
1.3 billion barrels and we
hope it could be more. It is
at least 1.3 billion barrels,"
he said.
Central bank governor Paul
Acquah said he was sticking
with his inflation target of 7
to 9 percent by endDecember 2007.
Analysts have been
sceptical about this level
citing the floods in northern
Ghana, the country's bread
basket.
"The inflation target is in the
9 percent to 7 percent
range. It's coming down
rapidly. Currently our rate is
10.4 percent," the governor
said. "Our target for endDecember is (7-9 percent).
We are an inflation-targeting
central bank and we we are
working seriously to achieve
this.“
Published September 27, 2007
by Sujata Rao
Press Coverage: The Republic of Ghana (cont’d)
Ghana Attracts Substantial Demand For Debut Bond Offering
The Republic of Ghana
attracted substantial interest
from a wide investor base for
its debut bond issue, said lead
managers Thursday.
Furthermore, Ghana is the first
post-HIPC (Heavily Indebted
Poor Countries) debt relief
country to successfully tap the
international capital markets.
policies that have secured
extensive external debt relief
under a series of international
creditor-driven initiatives," said
Paul Rawkins, a senior director
in Fitch's Sovereign rating team
in London.
The Ghanaian Finance and
Economic Planning Minister
Kwadwo Baah-Wiredu told Dow
Jones Newswires in May that
the proceeds from the debut
issue of bonds on international
capital markets will be used to
help upgrade the country's
fraying infrastructure.
"Its very positive to see high
demand for that type of credit,"
said Luis Costa, an emerging
markets debt strategist at ING.
Unlike Mexico, "Turkey priced
with virtually no premium - very
close in yields to the 2020's"
ING's Costa said.
Ghana was the third emerging
market sovereign to tap
international capital markets this
week, behind Mexico and
Turkey.
“The bond was three-times
oversubscribed - they had no
problem getting the deal away,"
Costa added.
Mexico became the first
The sovereign issuer attracted
emerging market sovereign to
over $3 billion orders received
return to overseas bond
from 158 investors and sold a
markets, since the summer
larger-than-expected $750
credit crisis and global market
million 10-year Eurobond via
sell-off. The sovereign raised $1
joint bookrunners Citi and UBS.
billion in a re-opening of its 2017
Kwadwo Baah-Wiredu said
and 2034 overseas global
The issue was priced at par to
although Ghana had received
bonds. Although the deal was
yield 8.5% which equates to 387
funds from organizations such four times oversubscribed, the
basis points over Treasurys.
as the African Development
country had to pay out much
Pricing was at the tight end of
Bank over many years, that had higher yields in comparison to
initial yield guidance in the 8.5%been "piecemeal," and the
the bonds' Friday closing levels.
8.75% area.
country required more cash to
Meanwhile, Turkey raised $1.25
"Ghana has emerged as a trend- improve its infrastructure.
billion from the sale of bonds
setter in sub-Saharan Africa,
Standard & Poor's Corp. and
maturing in 2018.
having entrenched political
Fitch Ratings assigned Ghana's
stability and put in place
debut notes a B+ rating.
macroeconomic
8
The bonds priced to yield 6.85%,
which is just below the 6.888%
yield on Turkey's last Eurobond
issuance in February, when the
country re-tapped its 2020 series
to sell $750 million.
As emerging market sovereigns
have started to return to capital
markets, it will only be a matter a
time before quasi-sovereigns
also come back, says Costa,
referring to Russia's Gazprom
and Rosneft.
Published September 27, 2007
By Clare Connaghan,
Press Coverage: The Republic of Ghana (cont’d)
Ghana thrills with $750m bond blowout
Ghana
was
welcomed
by
international
debt
investors
yesterday (Thursday) when it priced
the first offshore bond issue by a
sub-Saharan African government for
almost 30 years.
The $750m 10 year deal, led by
Citigroup and UBS, attracted more than
$3bn of orders from 158 accounts
across the globe.
The issue came as Ghana celebrates
its 50th year of independence. It was
the second issue from an Old World
emerging market issuer since the
recent market volatility, and followed a
successful $2bn five year bond by
India’s ICICI Bank and a $1.25bn 10
year issue by Turkey on Wednesday.
The strength of demand for these
transactions encouraged emerging
market debt specialists to believe
stability was returning to the market.
"Having seen two successful deals [in
EMEA] this week, we expect to see
more sovereign issuance — from
Gabon, for example," said one
syndicate banker in London. "Then the
quasi-sovereigns should come to the
market, which should pave the way for
financials and corporates."
Suggestions that a $750m deal would
be too big for B+/B+ rated Ghana and
hurt the market proved unfounded.
Priced at par, the bonds traded up to
101.50/102.00.
"We are very pleased with the outcome
of the deal, but not surprised it went so
well, given that we started working on it
in 2005," said Kwadwo Baah-Wiredu,
minister of finance and economic
planning in Accra. "It was well prepared
and represents the international efforts
made by Ghana over the years."
9
Ghana has implemented stringent
economic reforms in recent times, driving
inflation down from 41% in 2001 to
10.4% in August 2007.
Its GDP has grown strongly and Ghana
has also benefited from debt relief
agreements in 2001, 2002 and 2004
under the Enhanced Heavily Indebted
Poor Countries (HIPC) programme. It
received multilateral debt relief under last
year’s G8 initiative.
Ghana has implemented stringent
economic reforms in recent times, “Our
story has been very positive and this
positive evolution is the result of a lot of
discipline," said Baah-Wiredu. "As we
seek to continue on the growth path,
there are a number of reforms that we
want to undertake, including a major
overhaul of the country’s energy and
road infrastructure. We had the approval
from the parliament for an issue of up to
$750m to fund these projects.“
The transaction followed an intensive
roadshow where the issuer visited
investors in the US and Europe. These
visits helped to establish the main areas
of concern although reconciling the
investors’ feedback was no easy task.
"There was a wide range of opinions on
where value was on the deal," said an
official at Citigroup. "While there was a
consensus on the tenor accounts like, we
had to bridge the gap between the
variety of opinions as far as pricing was
concerned. Some accounts thought there
was value through 8%; others were at a
much wider end. The guidance of 8.5%
to 8.75% tried to encompass this
feedback and bridge this gap between
accounts."
Momentum built quickly, driving the
pricing to the tight end of guidance,
although some market participants
though that this was still on the generous
side.
"Right
timing,
right
credit
but
questionable pricing as the deal has
traded 30bp tighter,” one said. “It was too
cheap by some margin. The leads
obviously didn’t exert any pressure on
investors to get a better level, but then
leverage is with investors at the moment
and I think the leads played to that. I was
expecting a spread in the mid-200s and
they came at 387bp, so this was
generous indeed."
The leads defended the pricing. "Given
the deal’s significant size, we felt that a
print at 8.5% would give investors the
performance they were after," an official
at UBS said. "We did not want to do a
deal at 8.25% that would then go on to
trade weakly in the market. While a
smaller deal was available at a tighter
print, this was not what the issuer wanted
to achieve."
Leads feel their way
Pricing was also made difficult by the
lack of comparables. From Europe, the
Middle East and Africa’s emerging
markets, only Turkey had priced a deal
since the summer’s credit turmoil, and
Turkey is an extremely regular and
familiar issuer.
Since Ghana is single-B, sovereigns
such as Pakistan, Ecuador, Argentina
and Jamaica were considered as
benchmarks, but dismissed, because of
the specificity of each of those credits
and the wide ranges in which they trade.
Investors’ feedback was the main point of
reference.
Some accounts that participated in
the deal had already invested in
Africa through local currency bonds
and were therefore more familiar and
bullish about the credit. Several
Nigerian banks have also issued
Eurobonds this year.
Continental
European
investors
bought 29% of Ghana’s bonds, UK
accounts 28%, US buyers 42% and
Asians 1%. Asset managers took
65% and hedge funds 17%, leaving
18% for banks, insurance companies
and pension funds.
"The
proceeds
of
this
deal
supplement our domestic resources
which finance these projects in
Ghana," said Paul Acquah, governor
of the Bank of Ghana.
"We wanted to make sure that the
borrowing was consistent with our
objectives. Debt sustainability was at
the core of going forward with this
deal. It is important to bear in mind
how Ghana has been through an
energy crisis, how energy has been
rationed and generating issues. The
cost of fixing these issues is very high
but we had to make sure that we
used the proceeds in a prudent way.“
Published September 28, 2007
By Hélène Durand
Press Coverage: The Republic of Ghana (cont’d)
Africa is open
European and US dedicated EM accounts lapped up Ghana’s debut Eurobond last week in a deal that bodes well for
future sub-Saharan sovereign issuance. Disappointed investors helped propel the bond sharply higher in the
secondary market as the Republic established a liquid benchmark for the next EM frontier. John Weavers reports.
The Republic of Ghana (NR/B+/B+) secured an
outstanding book of US$3.25bn for last Thursday’s
debut US$750m 10-year Reg S 144a Eurobond,
demonstrating the pent-up appetite for sovereign
supply from the region. Citi and UBS were joint
bookrunners for the land-mark issue, which was
priced at par at the tight end of 8.5–8.75% guidance,
equivalent to 387bp over Treasuries, before rallying
on the break.
Jonathan Brown, managing director and
co-head of European syndicate at UBS, said
guidance for the first sub-Saharan sovereign
Eurobond outside South Africa in 30 years was done
in something of a vacuum owing to the lack of an
obvious comparable, as US investors looked to
Argentina and Venezuela, while Europeans focused
on Indonesia and Pakistan – “none of which really
fitted the bill”, according to Brown.
“Ghana could probably have done US$300m at
tighter pricing but the issuer needed to do a bigger
deal that attracted global demand. Their priority was
achieved by getting a size-able deal done at a
reasonable price that traded well in the secondary,”
he added.
Some would say the secondary performance was
too good, as the bond traded as high as 102-1/4 for a
45bp tightening against Treasuries before settling
back to 101-3/4–102-1/4 by late Friday, or 368bp
over 10-year US debt.
An origination manager away from the deal was
impressed by its timing, but criticised final pricing.
“The leads were not as aggressive as they could
have been, as a two-point rally for a 10-year suggests
another 1/8 or 1/4 point was clearly achievable,”
he said.
Brown argued that 8.25% or 8.375% in the
primary state was not practical if the deal was to
gain momentum.
10
“The issue needs to be protected against
potential volatility over the next week or so. Where
the deal trades in a fortnight will represent a better
gauge of how it has done,” he said.
Ghana’s Finance Minister, Kwadwo BaahWiredu,
was very pleased with the result and reiterated that
the money raised would be used to tackle energy
bottlenecks that have blighted the economy in recent
years as well as to improve transport infrastructure.
Maryam Khosrowshahi, managing director of
DCM at Citi, pointed out that such spending has a
higher economic return than typical World Bank and
ADB loan-funded projects, which are smaller, take
longer to arrange and tend to focus on social areas
such as education and health.
Stuart Culverhouse, chief economist at Exotix,
noted that the US$750m issue was certainly on the
higher side of initial expectations, saying: “This
represents a sizeable amount that underlines the
need for Ghana to continue with its economic
improvements and debt management reforms in
order to make that level of borrowing sustainable.”
Khosrowshahi described the transaction as a
“tremendous success that opens the door for other
African issues”, while Culverhouse sees the deal as a
significant development “that shows countries which
follow the right policies do not have to be cut off from
the international markets.”
As far as future issuance is concerned.
Baah-Wiredu stressed that Ghana would keep its
options open while staying within prudent guidelines
to maintain the country’s debt sustainability. He also
suggested that the sovereign bond had “opened the
gates through which Ghanaian corporates will follow.”
The scale of the demand should certainly
encourage other African issuers to come to the
market. Elsewhere in the sovereign space, Gabon is
expected to launch in November having mandated
Citi and JPMorgan, while Zambia, Tanzania and
Kenya are potential visitors, along with some
Nigerian banks, most probably in 2008.
Published September 29, 2007
The Republic of Ghana
Secondary Activity on Ghana 8.5% October 2017
October 2007
Strictly Private and Confidential
Trading History: Bid/Offer Price
Bid Price
103.0
Offer Price
102.5
102.0
Bid Price
101.5
101.0
100.5
100.0
Re-offer Price
99.5
99.0
9/24/2007
Week 0
24/09 – 29/09
9/30/2007
Week 1
01/10 – 05/10
10/6/2007
Week 2
08/10 – 12/10
10/12/2007
Week 3
15/10 – till date
Market Commentary
– The transaction was followed by a strong secondary market performance as investors were keen to buy the Ghana paper.
– The bid price has been stable considering this is the debut transaction for Ghana.
– The bond price increased to102 in the course of 6 days and has stabilized around the 102 region.
1
– The bid/offer spread was tightest at issue because of the high liquidity. The spread now is around 50 cents and would be
expected to remain around this area.
Trading History: Yield
8.30
Yield
8.25
8.20
8.15
9/24/2007
Week 0
24/09 – 29/09
9/30/2007
Week 1
01/10 – 05/10
10/6/2007
Week 2
08/10 – 12/10
10/12/2007Week
3
15/10 – till date
Market Commentary
– The yield tightened last week from the 8.22 region during the first week of trading to around 8.17 corresponding to an
appreciation in bid price during this period.
2
Trading Volume
50
Principal Amount USD (millions)
45
40
35
30
25
20
15
10
5
0
Week 0
24/09 – 29/09
Week 1
01/10 – 05/10
Market Commentary
– Week 0: Balanced customer flows.
– Week 1: Small flow, net customer sellers.
– Week 2: Net street selling, small customer buying.
3
Week 2
08/10 – 12/10
Week 3
15/10 – till date
SOME LESSONS LEARNED AND
CHALLENGES


Challenge of creating a meaningful role for local investment
banking and legal experts - 3 Local co managers appointed
but process is almost completely managed by international
advisors because of highly technical nature of work. How do
we capture some of the expertise locally when lead managers
carry liability?
100% pot allotment means




local managers are unable to participate in allotment process
difficulty of securing allotments for critical local investment
constituencies
Reorienting economic management from program-driven
discipline to market-driven discipline
Developing a strong investor relations culture to support
secondary market and future issues e.g. information desk,
regular information releases, etc
25