DDEP arrangement: Organised labour urges pension funds to cooperate
Organised labour has encouraged the various boards of trustees of pension funds to participate in the Alternative Offer for Pension Funds Exchange, the new offer to pension fund managers under the Domestic Debt Exchange Programme (DDEP).
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In a communique signed by the Secretary-General of the Trades Union Congress, Dr Yaw Baah, and issued in Accra last Thursday, the leadership of organised labour, however, stressed that participation in the voluntary offer should be in the best interest of members after independently assessing the alternative offer.
The leadership of organised labour said after an extensive deliberation of the offer, as stated in the Exchange Memorandum issued by the Ministry of Finance on July 31, 2023, the meeting concluded that the terms stated in the Alternative Offer were better than the initial offer organised labour had rejected in December last year.
Guarantee
It said labour, particularly, found that the alternative offers guaranteed no loss in patrimonial value, which meant that bonds held by pension schemes would not incur any losses on their patrimonial value.
It said it also found out that the securities under the new offer could be actively traded in the secondary bond market.
It added that the new offer provided the assurances that coupons and maturities would be paid on time.
“The meeting resolved that organised labour will closely monitor the implementation of the provisions in the Exchange Memorandum to ensure that the government does not default in the payment of interests and principal when they fall due. In other words, organised labour will not tolerate default,” the communique stressed.
It added that if the government failed to implement the provisions as stated in the Exchange Memorandum, organised labour would advise itself.
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Background
On July 31, 2023, the government announced that it was inviting Pension Funds (as defined in the Exchange Memorandum) holding domestic notes and bonds of the central government, E.S.L.A. Plc and Daakye Trust Plc to exchange approximately GH¢31 billion principal amount of eligible bonds for a package of new bonds.
The terms and conditions of the invitation are described in the exchange memorandum dated July 31 (the Exchange Memorandum).
“This invitation is intended to enable the Pension Funds to preserve their patrimonial value while exchanging their eligible bonds for bonds that offer more potential liquidity,” it said.
Invitation summary
The invitation, it said, was available only to registered holders of eligible bonds that were Pension Funds (eligible holders), and that eligible holders tendering their eligible bonds pursuant to the invitation would receive exchange bonds of the government on the terms and subject to the conditions described in the Exchange Memorandum.
The statement said all offers to exchange eligible bonds made by eligible holders (an “Offer” or “Exchange Instruction”) were irrevocable and subject to withdrawal rights under certain limited circumstances, and that by tendering their eligible bonds, “eligible holders represent and warrant that such eligible bonds constitute all the eligible bonds owned by them and consent to the blocking by the Central Securities Depository (CSD) of any attempt to transfer them prior to the Settlement Date (as defined below) or the termination of the Invitation by the Republic”.
Offers, it said, could only be submitted on the launch date of July 31, 2023, and would end at 4 p.m. (GMT) on August 18, 2023.
However, the statement said, the government might extend the expiration date, including for one or more series of eligible bonds.
In addition to the Exchange Bonds, it said tendering eligible holders would receive a distribution of two additional interest payment instruments linked to the Exchange Bonds, with no principal amount, each maturing, respectively, in 2027 and 2028 (collectively, the “New Interest-Only Bonds”).