African bondholders have, for the first time ever, come together to form a unified negotiating bloc, a decisive step towards protecting the interests of its members.
This is happening in the wake of Ghana’s Eurobond default in 2021.
This is according to information gathered from a reliable source with knowledge of the block’s formation and negotiations.
The coalition, known as the Regional Eurobond Investor Group, ensured that African bondholders had a strong voice in the restructuring process, a domain traditionally dominated by European and Western creditors.
The Group was advised by Renaissance Capital Africa.
Historically, the Paris Club has been the primary forum where bond-related issues, including defaults and restructurings, are negotiated. However, these discussions which are driven by the IMF, have often prioritized the interests of European and Western creditors. In recent times, China has also become a key driver.
Recognizing the need for a more balanced representation, local creditors in Africa, spearheaded by West African institutions, established their own bloc to advocate for their interests during these negotiations.
“The formation of this group is Africa’s response to an old system led exclusively by the Paris Club and European debt restructuring advisers” a member of the Regional Eurobond Investor Group told TheWitness.
“We needed a platform that would focus on the interests of African bondholders and ensure that our voices are heard in these critical discussions.”
The group’s creation marks the first time a regional Eurobond investor group has been formed specifically to participate in a Eurobond restructuring process. Its membership comprises financial institutions, asset managers, and family offices from across the continent.
According to TheWitness’ findings, the Regional Eurobond Investor Group currently holds about 15% of Ghana’s total outstanding Eurobonds. In comparison, international creditor groups control approximately 40%.
The Regional Eurobond Investor Group’s holdings are primarily medium to long-term instruments, reflecting a strategy focused on buy-to-maturity primary market investments. This approach the source says underpins the group’s commitment to safeguarding the interests of African investors over the long term.
The formation of this group is a significant milestone for African bondholders. It represents a collective effort to ensure that their perspectives are adequately represented in negotiations that have far-reaching implications for their investments.
“This is the first time such a group has been formed,” the source continued. “The idea is that regional groups will continue to set rules and guidelines that protect the interests of regional bondholders, who not only have a stake as creditors but also as Africans.”
The concept of Regional Eurobond Investor Groups aims to create a more equitable framework for debt restructuring that considers the unique challenges and opportunities facing African economies.
Ghana’s Eurobond default has highlighted the complexities of sovereign debt management in Africa. The country’s debt crisis has underscored the need for a more inclusive approach to debt restructuring, one that takes into account the diverse interests of all creditors, including those from the African continent.
As the concept of regional groups grows and assert their influence, it is expected that they play a crucial role in shaping the future of sovereign debt negotiations in Africa.