A consortium of local and international banks have reposed confidence in the country’s economy and the cocoa sector in particular by agreeing to lend the Ghana Cocoa Board (COCOBOD) US$1.8 billion to be used to purchase cocoa beans in the 2015/16 cocoa season.
The board sealed the deal yesterday in Paris, France, where the Chief Executive Officer of COCOBOD, Dr Stephen K. Opuni, and the participating banks signed the agreement to pave the way for the transfer of the money to Ghana.
In attendance was a Deputy Minister of Finance, Mr Cassiel Ato Forson, and Ghana’s High Commissioner to the United Kingdom, Mr Victor Smith.
The amount will fund the purchase of some 850,000 tonnes of cocoa beans from licensed buying companies (LBCs) in the ongoing season.
In the meantime, however, the transfer of the money from the lenders to the Bank of Ghana (BoG), from where it will be disbursed, will help cushion the country’s gross reserves, while helping stabilise the local currency from its depreciation.
The Public Affairs Manager of the board, Mr Noah Amenyah, said in Accra that the facility was oversubscribed by 44 per cent and would attract interest of 1.19 per cent.
“In total, the banks were offering to lend US$2.6 billion to COCOBOD at the same 1.19 per cent, and that is in spite of the challenges we have in the financial market,” he said.
Out of the 22 banks that participated in this year’s syndication, only one, Ecobank Ghana Limited, was a local bank.
Credibility
The oversubscription of the loan comes in the wake of a grim outlook in the global financial market which has impacted negatively on international transactions.
In Ghana, the Ministry of Finance plans to raise US$1.5 billion through a Eurobond that would mature in 10 years despite the turbulence in the market.
The 2014 Eurobond, which was $1 billion, attracted a rate of 8.78 per cent and the ministry was hopeful of a better rate this time round.
“For the oversubscription, I think it is due to the credibility the board has out there. Under the current circumstance, I am not sure anybody will get an oversubscription with this kind of rate,” the Public Affairs Manager added.
Per the agreement, COCOBOD should finish repaying the loan before September 2016, the time the board will go back for a new loan.
Repayment
Globally, financial experts have long praised COCOBOD’s syndication process as one of the best long-running commodity-backed deals that continues to attract interest from dozens of financial institutions worldwide.
The syndication process started in the 1992/3 cocoa season when the board raised US$140 million from a group of banks to finance the season’s cocoa output.
Since then, the process has become an annual affair that foreign banks look forward to.
Mr Amenyah said the fact that 23 foreign banks participated in the deal confirmed that COCOBOD was now a credible institution to lend to.
“When it comes to repayment, we do not have a problem. We also ensure that the money is used for the purpose for which we borrowed,” he added.
He was optimistic that the board would attain its production target, which formed the basis of the loan.
The loan is guaranteed by the season’s produce and a shortfall in cocoa production comparative to the season’s target – 850,000 tonnes – could trigger suspicions of default among the participating banks.
– Source: graphic.com
