Ghana Lands $800M Loan from Global Lenders at Record 8% Interest Rate

Infostride News reports that Ghana’s cocoa marketing board, COCOBOD, has recently entered into its annual loan agreement with international banks, securing funds for cocoa purchases at a record-high interest rate of 8%, as disclosed by Bloomberg. This development follows Ghana’s debt restructuring earlier in the year, which had a negative impact on its appeal to investors.

This particular loan agreement is noted to be the most expensive the board has agreed upon since the initiation of such arrangements in 1992-93. The timing of the signing is also noteworthy, as it is the first instance where the agreement has been finalized in November. Typically, these agreements are concluded in September after the completion of COCOBOD’s roadshow held in July. The deal involves eight participating banks, with Coöperatieve Rabobank UA leading the arrangement, assisted by Standard Chartered Plc and Societe Generale SA, according to sources.

Ray Ankrah, Deputy Chief Executive Officer of COCOBOD, expressed the board’s eagerness to draw down the funds as quickly as they are approved. The approval for the transaction was granted by Ghana’s parliament last week, allowing COCOBOD to move forward with finalizing paperwork in collaboration with the participating banks.

The structure of the loan, as outlined in terms presented to lawmakers by the parliamentary finance committee, stipulates that COCOBOD will be obligated to pay the Secured Overnight Financing Rate (SOFR) for one month. The current SOFR, standing at approximately 5.3% according to the New York Fed website, will be augmented by a margin of 2.65%.

The high-interest rate, as explained by COCOBOD’s Deputy CEO, is not indicative of the agency’s creditworthiness but rather a consequence of tightening funding sources. He clarified, “The rate is high because of the SOFR, and that is a reflection of the tightening of funding sources on the global money market. This is a self-liquidating facility which is collateralised, and the risk to it is zero.”

In terms of the loan amount, COCOBOD aims to secure a total of $1.2 billion for the current cocoa season. Of this amount, $800 million is set to be obtained from the syndicate of lenders, while the remaining $400 million is earmarked to be raised from alternative sources such as Olam Group Ltd. and Barry Callebaut AG to supplement the funds.

This development in COCOBOD’s financial arrangements underscores the challenges posed by the changing dynamics of global financial markets, with the board adapting to the current economic landscape to ensure the continued support of Ghana’s vital cocoa industry. The timing and terms of this loan agreement reflect the ongoing efforts of COCOBOD to navigate financial challenges while sustaining the country’s cocoa sector, a crucial component of Ghana’s economy. Infostride News will continue to monitor and provide updates on developments in Ghana’s economic landscape, particularly those impacting key sectors such as agriculture and finance.