Gov’t to issue US$403m bond for 5 undercapitalized banks

Ken Ofori-Atta, Finance Minister

Government will issue a GHc 403 million bond this month to finance the five undercapitalized banks under the Ghana Amalgamated Trust (GAT), a report by Bloomberg has indicated.

Government through the Ministry of Finance created the Ghana Amalgamated Trust, as special purpose vehicle to help five banks which were undercapitalized to meet the GHc 400 million capital requirement after the banking sector reform.

GAT is expected to pay debt investors a once-off annualized rate of 21 percent when the bonds mature after five years, Managing Director of GAT Eric Otoo told Bloomberg in an interview.

GAT will then seek to exit the holdings through buy-outs or listings on the local bourse, he said.

GAT’s formation and debt sale come in the closing stages of a sector cleanup during which banks had to raise their capital holdings, a process which cut the number of banks by almost a third to 23.

The reforms announced in September 2017 triggered a series of capital-raising efforts while the government issued GHc9.8 billion in bonds to cover the liabilities of poorly-managed banks and protect depositors’ funds.

The five banks that will receive funding from GAT didn’t meet the capital threshold but are soundly managed, said Otoo.

The beneficiaries are National Investment Bank Ltd., Agricultural Development Bank Ltd. UMB Bank Ltd., Prudential Bank Ltd. and the merged entity of BSIC Ghana and Omni Bank Ltd.

“It’s an arrangement to save the system, salvage the situation and allow the banks involved some time to pay back,” said Otoo.

A roadshow for the debt sale will start Feb. 18th. The government will guarantee 70 percent of the sales, according to the finance ministry.

Source: Bloomberg