(Security): Fitch Downgrades Ghana Local Debt Rating to ‘Restrictive Default’ on Distressed Swap

Fitch Ratings downgraded Ghana’s local-currency credit score to default after the nation completed a domestic debt exchange.

The agency now considers Ghana’s domestic debt to be in restrictive default as the swap constitutes a distressed debt exchange, according to a Tuesday, February 14, 2023, statement. Fitch cited the “material reduction in terms vis-à-vis the original contractual terms, and the fact that the exchange is needed to avoid a traditional payment default,” analysts Thomas Garreau and Jan Friederich wrote.  

A Ghanaian government plan to reorganize its domestic debt received acceptance from more than 80% of bondholders, the Finance Ministry announced late Monday, a key step in the country’s efforts to secure a $3 billion bailout from the International Monetary Fund. The authorities had targeted an 80% subscription rate for the domestic-debt restructuring to be deemed successful and the offer deadline was postponed five times to improve participation.

Fitch also affirmed the nation’s foreign currency rating at C, the lowest score before default. Because a Eurobond coupon payment due last month hasn’t been honored, the agency will cut the foreign-currency grade to ‘RD’ after the grace period expires on Feb. 17, according to the statement. 

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