Ghana’s restriction on forex deals forces mortgage firm to cedi debt

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Moses Mozart Dzawu Accra

Ghana Home Loans, a mortgage provider owned by Dubai’s Abraaj Group, is considering dropping a plan to sell dollar bonds in favour of cedi debt after a clampdown on foreign-exchange transactions.

The nation’s only provider of home loans, excluding banks, planned to sell $100 million (R1.05 billion) in tranches over two to three years, chief operating officer Kojo Addo-Kufuor said, adding that it would now look at issuing the notes without linking them to the greenback and expected the first sale before the end of 2014.

Widening current-account and budget deficits have weighed on Ghana’s dollar securities, with the debt losing 1.5 percent this year, the worst among 57 emerging-market sovereign-bond indices.

It will be the first local corporate bond issue since 2008.

“The problem is the inability to offer dollars or a dollar-linked asset,” said Addo-Kufuor. “We have asked the central bank whether debt issues like ours are covered by the rules, but no firm answer as yet.”

John Ofosu Awuku, a money manager at NDK Asset Management, said: “I would have preferred a dollar bond that pays coupons in dollars, because that hedges against depreciation of the cedi. But if the cedi bonds are linked to the treasury bill rate, that would give the investor a net return as treasury bill rates in Ghana are priced higher than inflation.”

Yields on 91-day treasury bills have climbed 485 basis points this year to 24.1 percent at an auction on Friday. The cedi gained 0.7 percent to 2.7550 per dollar by 7.41am in Accra yesterday. Inflation accelerated for a seventh month to 14.5 percent in March from 14 percent in the previous month.

Fitch Ratings cut its outlook on Ghana’s debt last month to negative from stable, five months after downgrading the rating by one level to B.

Ghana Home Loans would target local pension investors, insurance firms and state pension fund manager Social Security and National Insurance Trust, said Addo-Kufuor, adding the bonds, which would be in five or 10-year tenures, would be open to foreign investors and listed on the Ghana Stock Exchange for secondary trading.

The country had a housing deficit of more than 1.7 million units, Water Resources, Works and Housing Minister Collins Dauda said last year.

The mortgage company has borrowed from the US government’s Overseas Private Investment, The Hague-based Entrepreneurial Development Bank, Cologne-based Deutsche Investitions-und Entwicklungsgesellschaft and International Finance Corporation to fund mortgages.

With a loan portfolio of more than $100m, Addo-Kufuor said it charged a base lending rate of 12.5 percent for dollar-denominated mortgages, which it gave to people who earned salaries in the US currency. Cedi loans were given at 91- or 182-day treasury-bill yields plus a margin, he said. Yields on 182-day notes were 21.3 percent on Friday.

“We’re not clear on how we’d do a dollar bond in the current environment.” – Bloomberg


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