Some individual insurance companies are hesitant to sign on to the government Domestic Debt Exchange Programme (DDEP) even though the larger association reached an arrangement with the government last week, with today being the deadline.
Information reaching Graphic Business at the time of going to press, indicated that much as the association agreed to the terms of the DDEP, the final decision to participate rests solely on the approval of the boards and shareholders of the individual companies.
It is not immediately clear what this latest development means to the implementation of the DDEP.
Sources told Graphic Business that the deadline for the programme was too short because the final agreement to participate in the DDEP needed to go through some rigorous processes before a final decision was taken.
The source said, for instance, that most of the insurance companies were foreign-owned and listed on the stock exchange in their respective countries.
“Any decision for the company to participate in this DDEP must be done with the approval of shareholders.
The companies need to call an emergency annual general meeting and table the issues for approval by the shareholders before a decision can be take,” the source said.
It also noted that those that are not listed have to go through their boards, a process that cannot take just a few days to complete.
The source said while the association agreed to the terms, there was a caveat just as agreed with the banks that “participation in the DDEP is absolutely voluntary”.
Meanwhile, the government is racing against time to close the deal by today, January 31, after it had postponed the exercise on a couple of occasions to allow for broader consultations with stakeholders.
So far three groups have signed onto the deal in principle. They are the Ghana Association of Banks (GAB), Ghana Insurers Association (GIA) and the Ghana Securities Industry Association (GSIA).
Background
The government agreed with the banks to pay five per cent coupon (interest) on bonds for this year.
It will also pay a single coupon of nine per cent on the 12 new bonds it proposes to issue to domestic bondholders who tender their old bonds.
The government and the banks also agreed on the removal or amendment of all clauses in the Exchange Memorandum that empowered the Republic to, at its sole discretion, vary the terms of the exchange.
The parties issued the statement after a crunch meeting on Monday, January, 23, 2023 to negotiate new designs and concessions to make it easier for banks to participate in the voluntary DDEP.
The bankers association also asked the government to provide clarity on the operational framework and terms of access to the Ghana Financial Stability Fund (GFSF).
The fund is expected to help fund managers, banks, insurance companies and the likes with cash flow to meet their obligations as they fall due, in view of the cash flow challenges the debt exchange programme would bring upon the participating institutions.
The programme deadline is today.
Context
Even though bond coupons are usually paid in two installments, under the DDEP, the government proposed to pay no interest for this year.
However, bonds maturing from 2024 will receive five per cent coupon in 2024 and thereafter between nine per cent and 10.65 per cent.