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Ghana falls on US consortium to secure $1-bln bridge finance
Posted by admin on 23rd March 2015

Minister of Finance Seth Terkper has written to Parliament to inform the House of government’s decision to seek a bridge finance of between $300 million and $1 billion in the first half of 2015.

According to Reuters, the memo stated that the money is meant to “redeem maturing domestic debt”.

Bridge financing, according to the financial dictionary, is “an interim financing of one sort or another used to solidify a position until more permanent financing is arranged… Financing or credit that an investment bank or venture capital firm extends until long-term financing can be arranged or an obligation is removed.”

The memo from the Finance Minister also added that a Eurobond of up to $1.5 billion will be issued in the second half of the year to retire the bridge finance, refinance domestic and external debt and fund 2015 capital expenditure.

The government has started talks with a consortium including Bank of America Merrill Lynch as international advisors and Belstar Capital as local arrangers for the bridge finance, the report said.

Meanwhile, Moody’s has downgraded Ghana’s sovereign rating from B2 to B3 with a negative outlook in its latest release. Ghana has served notice that the slumping oil prices on the world market have affected government’s budget deficit.

Moody’s said the key drivers informing its decision are:

1) Deteriorating debt dynamics as reflected by an increasing debt burden due to large fiscal imbalances and a sharp weakening of the country’s national currency, combined with reduced debt affordability stemming from a high cost of funding in the domestic market;

2) Increased government liquidity risks, as the government faces large gross borrowing requirements amid more difficult domestic and external funding conditions.

“The negative outlook reflects further downside risk to the country’s debt dynamics and liquidity pressure in the short-term if the country’s policies fail to successfully contain its fiscal deficit, stabilize its currency and address current impediments to higher economic growth,” Moody’s said.

Source: Ghana/