A group of Eurobond investors affected by Ghana’s Domestic Debt Exchange Programme (DDEP) have decided to take legal action against commercial banks for their role in restructuring their bonds. These investors, who suffered financial losses due to the restructuring, argue that they trusted these banks when making their investments, only to see their capital significantly reduced. According to reports from JOYBUSINESS, the legal representatives of the aggrieved investors have formally notified the banks of their intent to sue, claiming that the restructuring resulted in severe financial losses. Interestingly, even some investors who chose not to participate in the debt exchange are also pursuing legal avenues, as they, too, experienced declines in the value of their investments. The situation highlights growing dissatisfaction among bondholders, who feel misled and financially burdened by the government’s debt restructuring efforts.
The roots of this issue trace back to September 2024, when the Ghanaian government launched its Debt Exchange Programme aimed at Eurobond holders. The initiative was designed to swap old bonds for new ones under different conditions, with the goal of reducing the country’s debt servicing obligations. Investors were given two options: the PAR Option, which had a lower interest rate of 1.5%, and the DISCO Option, which imposed a 37% nominal reduction in principal but offered higher interest rates between 5% and 6%. The government projected savings of approximately $5 billion from this restructuring. However, many investors believe they were left in a worse financial position, leading to the current wave of legal threats. The controversy underscores the broader financial challenges facing Ghana, as the country seeks ways to manage its debt burden while also maintaining investor confidence.
In response to these legal threats, the Ghana Association of Banks (GAB) has expressed surprise, arguing that commercial banks merely acted as intermediaries in the Eurobond issuance process. John Awuah, the CEO of GAB, emphasized that the banks functioned as agents of the government and were not responsible for the terms of the debt restructuring. He further noted that the bonds included collective action clauses, meaning that any changes in terms were subject to the agreement of a majority of bondholders. Consequently, he believes that the commercial banks should not be held accountable for the losses suffered by investors. Despite these arguments, the investors remain adamant about seeking legal redress, signaling a potential legal battle that could have far-reaching implications for Ghana’s financial sector. Meanwhile, the government continues to explore other financial avenues, including a $250 million World Bank funding initiative aimed at supporting banks affected by the debt restructuring. As the situation unfolds, it remains to be seen whether the courts will rule in favor of the investors or uphold the banks’ defense that they were merely acting on behalf of the government.
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