…As Finance Ministry’s statement on $2.25billion bond raises more questions than answers
A statement by the Finance Ministry, purposed to explain away strong evidence that the $2.25billion bond that Finance Minister, Ken Ofori Atta, recently issued, was preferentially sold to his business partner’s company, has ended up raising more questions than answers.
The 20th April, 2016 Statement, which claimed to respond to issues that the Minority in Parliament has raised about the Franklin Templeton scandal, tiptoed around the main concern of the Minority – the strange coincidence of Franklin Templeton buying 95% of the bonds when Trevor G Trefgarne, a business partner of the Finance Minister, is a Board member of FT.
The statement totally shied away from addressing the interconnection between FT and the Enterprise Group Limited owned by the Finance Minister, through Hon. Trevor G. Trefgarne, who is a member of the Board of FT and at the same time the Chairman of the Board of Directors at the Enterprise Group.
The statement by the Finance Ministry also shied away from explaining the connection of Attorney General, Gloria Akuffo, to the Enterprise Group, as a former director of the firm when under normal circumstance the Finance Ministry should have sought legal advice from the AG before selling the bonds.
Rather, the statement, in some parts, resorted to laughable rubrics, including claims that Franklin Templeton had consulted the IMF before buying the bonds, while the substantive issue of Trevor Trefgarne’s straddling connection between Enterprise Group and FT was never addressed.
The Minority has since issued another statement, expressing utter surprise that the central issue of conflict of interest was not addressed by the Finance Ministry’s response.
Member of Parliament for Bolga Central, Isaac Adongo, who is asking for the resignation of the Finance Minister, has said that the fact that the $2.25billion bond had been sold without legal opinion from the Attorney General is an abnormality.
Attorney General, Gloria Akuffo has confirmed that indeed she knew nothing about the sale of the bonds.
With the Finance Ministry’s statement on the issue multiplying question marks on the transaction, impressions that the Akufo-Addo regime is obscurantist has been deepened further.
While claiming that the sale of the bond had been open with some 25 companies, both local and foreign participating, the statement, which was issued by the Public Relations unit of the Ministry, strangely failed to name these companies.
Interestingly, the same Public Relations unit of the Ministry of Finance was the one which had released the earlier statement announcing the sale of the gargantuan $2.25 billion bond.
The announcement had come to Ghanaians as a surprise because prior to the proclamation no Initial Public Offering had been communicated to the public.
It would be recalled that in the statement which announced the sale of the bond, the name of Franklin Templeton as majority bond buyer had been kept secret, with the statement only describing the company as a well respected global investor.
It had taken the media to dig up that Franklin Templeton is the major bond buyer in question, and to map out the connection between the US based firm and the Enterprise Group, based in Ghana and partly owned by the Finance Minister.
Last Tuesday, MPs belonging to the opposition National Democratic Congress held a press conference and demanded Parliamentary Enquiry into circumstances under which Franklin Templeton got to buy 95% of bonds when most Ghanaians had not been in knowledge of the sale of the bonds.
Underscoring the fact that Trveor G. Trefgarne, a business partner of the Finance Minister, is also a Board Member of FT, the Minority had served notice of intent to petition the Financial Services Authority, while threatening to go to the Commission of Human Rights and Administrative Justice if Parliament fails to enquire into the scandal.
It was in response of this threat that the Finance Ministry issued a statement. However, before urging the public to ignore the concerns of the Minority, the statement failed to clarify matters, rather, stirring up more questions.
On the matter of the Minority’s observation that the issuance of the bond was shrouded in secrecy, the Finance Ministry’s statement claimed that the book runners of the Ministry (traditional underwriters for the Ministry) on behalf of the Ministry had been mandated since 2015 to issue domestic bonds.
These principal underwriters, which, according to the statement, are made up of private banking institutions, including Barclays and Stanbic Banks and the Strategic African Securities owned by Togbe Afede, have been mandated to regularly issue bonds on behalf of the Finance Ministry per a debt issuance calendar which the Finance Ministry releases every quarter (4 months).
In this Templeton case, the statement said, the book runners had announced the bond sales on 30th March through emails and publications on the websites of the Ministry of Finance and that of the Bank of Ghana with a settlement on 3rd April in line with laid down tradition.
However, it has since become poignant that the claim that the book runners have been mandated to regularly issue such bonds is not true.
According to Economists, the mandate of the book runners has never been open-ended in the face of the huge nature of the amount involved.
“The book runners have never in the history of our country arranged domestic bonds close to 10 billion Ghana cedis in one-go and that alone would have required special governmental clearance by the Finance Minister,” a statement on social media underscores.
In other words, given the magnitude of the amount involved, special governmental clearance from the Minister of Finance is required before the sale: the Finance Minister, therefore, approved the sale of the bond to Franklin Templeton by special clearance even though he knew FT was affiliated to his friend and business partner, Trevor G. Trefgarne.
The Minority’s response statement to that of the Finance Ministry’s also slammed the claim that the 7 year and 15 year bonds issued by the Ministry with Templeton as majority buyer with privileged insider information had been on the bond issuance calendar, saying it is a lie.
Questions have also arisen in the light of revelation by the ministry’s statement that communication about the sale of the bond had been partly done through emails, with some of the emails about the sale specifically addressed to Franklin Templeton even though at the time it was known that Trevor G. Trefgarne, who is a Board Member of FT, is also a business partner of the Finance Minister. Mr. Trefgarne chairs the Board of Enterprise Group, a company co-owned by the Finance Minister.
The Minority in Parliament has underscored that, “the initial pricing guidelines of the bond were issued around 5:37pm on the 30th March 2017 by email at the time that domestic investors may have left their offices.”
Franklin Templeton bought majority of the bonds at an expensive coupon rate of 19.75%. The Minority in Parliament has since wondered if the Finance Minister’s relationship with a director of FT contributed in pegging the coupon rate so high.
MP for Bolga Central, Isaac Adongo denounces that high coupon rate as reckless; explaining that if the Ministry of Finance had been more transparent, interplay between demand and supply would have eventually brought the coupon rate down.
“Nobody knew about it (bond issuance) we woke up one morning, somebody sitting in the US was aware that there was going to be an opening of tender here while investors who are holding pension funds in Ghana, investors who are dealing in the market were completely unaware,” Mr. Adongo told Accra-based Radio Gold.
He lamented that, “the tender was opened at 9 am and by 1pm it was closed,” saying that if the Ministry had left it opened for at least three days, the high coupon rate would have been brought down drastically since most investors initially test the market with offers.
The Minority in Parliament also points out that the transaction was even opened before it was announced: “The public announcement of the transaction was sent by email at approximately 9:09 am on the 31st of March, 2017, contrary to the statement by the Ministry of Finance that the announcement was made to the public on the 30th March 2017.”
According to the Ministry’s statement, “there were over 25 other buyers including other foreign entities, who all brought in dollars to convert to cedis to buy the bonds.” Strangely however, the statement could not state the names of the companies or reasons why they did not get to buy the bonds, even as Trevor G. Trefgarne’s FT ended up buying over 95%. It is worth noting that even the name of FT, as the majority bond buyer, had been investigated out by the media.
In the attempt to parry the obvious evidence that FT bought the shares through preferential treatment, the Finance Ministry claimed that, “… local investors also participated. The said investor participated in the issuance in the manner they have always done since 2006 through their local Primary Dealer, Barclays Bank and their local custodians, Standard Chartered Bank and Stanbic Bank.”
Again, strangely, the statement does not name these local companies. The revelation that Stanbic Bank, which was named in the same statement as a book runner of the Finance Ministry, is also a local custodian of some of the local companies which had participated in the bond issued by the same Finance Ministry has left another interesting question in the air. ‘So Stanbic Bank partly issued the bond on behalf of the Ministry of Finance, partly through direct emails to companies expected to be interested in buying the bonds and some of these companies have Stanbic as their bankers?
The Finance Ministry’s statement said, “the investor in question, FT, has held Government of Ghana bonds of up to USD 2 Billion prior to this transaction. Indeed FT has been buying and investing in government bonds since 2006.” It has since generated the question as to why it had to take media investigations to uncover that FT is the, ‘well respected global investor’ which bought Ken Ofori-Atta’s bonds.
On concerns about the fact that the issuance of the bonds did not receive Parliamentary approval the Finance Ministry’s statement declared that Parliamentary approval was not required.
“This issuance, like all other domestic bonds issued under this bond program since 2015, did not require Parliamentary approval. Approval was given under the initial application to Parliament in the 2015 Budget Statement and Economic Policy document, to run such a bond issuance program.”
But Hon. Isaac Adongo has emphasized the contrary. According to him, even though it is true that the $2.25 billion bond is actually a GHc9.7 billion local bond, the local bond became an international one because of the nature of its placement.
According to him, the fact that Franklin Templeton alone, an offshore US based company, got to practically buy the whole bond in an atmosphere of secrecy implies that the placement of the bond was selectively done with that US Company, making it a private placement.
That particular transaction, according to Hon. Adongo, now becomes a private business between the GoG and the foreign entity and therefore qualifies as an international transaction.
Every international business requires prior Parliamentary approval, even as GoG is in court with Waterville BVI because a contract that had been awarded Waterville had later been abrogated with the Supreme Court ordering Waterville to pay back $25million that had resulted from the abrogation; because, according to the SC, the contract did not go before Parliament.
“So you realize that they (Finance Ministry) used the guise of a domestic bond to deliver a foreign bond,” Hon. Adongo said, adding that though it was a domestic bond, its issuance was in dollars while a foreign company ended up buying the bonds; these are the characteristics of a foreign transaction.
As part of the justification of the bond sale, the Finance Ministry’s statement said the bond had been sold to raise money to service domestic government debts and, because of this, it is not going to add to the debt situation of the country.
“The proceeds from the bond issue are to be used for liability management and for the re-profiling of our domestic debt stock by repaying more expensive short-term debt as it matures, as such it shall not add to the total debt stock of the nation.”
However, as already indicated, the MP for Bolga Central, Isaac Adongo, has slammed the 19.75 coupon rate as exorbitant. If the money is going to service debts that have already been incurred therefore, the comparative analysis borders on questions as to what rate those debts to be serviced were contracted.
The Finance Ministry’s statement is totally bereft of this analysis, leaving questions in the air regarding the claims that this bond issuance in the long run will not add to the national debt.
“If the debt that the Akufo-Addo government is borrowing at a coupon rate of 19.75% to service, was for instance borrowed at a coupon rate of 10%, then in the long run this debt servicing program is not advantageous,” a financial expert speaking on condition of anonymity with The Republic explained.
The explanation that the NPP government is essentially borrowing at a coupon rate of 19.75% to pay debt has also served to highlight double standards on the part of the regime, which, when in opposition, bashed the erstwhile NDC government for borrowing to pay debt.
By the explanation, the Finance Minister is implying that the promise by the NPP in opposition to use innovative and super ingenious methods to run the economy when in power is really not there, and that the party is really open to using the same methods that the NDC used to manage the country’s debt.
The ministry’s admission that this borrowing has its legal roots in the 2015 budget under the erstwhile Mahama regime also proves that the very thing that the NPP took the NDC to the cleaners for when in opposition is what the party is now leveraging in power.
According to the statement by the the Finance Ministry, “this deal is a positive move in the current debt management strategy being pursued by government and should be applauded.
“…The Ministry has no choice but to surmise that these allegations (by Minority) are maliciously designed to malign and negate the positive news and rave reviews this landmark transaction has garnered, both locally and internationally”.
However, International news Agency, Reuters, has already mocked the bond issuance as, “a jumbo debt action,” while the Minority in Parliament has called for Parliamentary Enquiry into it.
In the response statement by the Minority, signed by Hon. Haruna Idrissu, Minority Leader, the ministry is told plainly that the substance of the matter is still pending.
“We urge the Ministry of Finance to come again and explain to the public the processes leading to the issuance of the BOND and the conflict of interest situations arising out of the transaction.”
Source: therepublicnewsonline.com/ Fiifi Samuels