COCOBOD asks investors to fund cocoa purchases, but proceeds may also repay old debt

The Ghana Commercial Banks and Development Company (COCOBOD) is seeking investors to fund its cocoa purchases through its first commercial paper offer under the GH¢16.3 billion Cocoa Notes Programme. However, the funds raised may also be used to repay an old debt in the form of a bridge loan, despite being marketed as a means to finance cocoa purchases.

This discrepancy was highlighted in an investor presentation earlier this month. According to the programme, approximately GH¢14 billion of short-term commercial paper was allocated for cocoa purchases, while GH¢2.3 billion of longer-term bonds were earmarked for refinancing existing cocoa obligations. Nevertheless, the investor presentation did not disclose that proceeds from commercial paper could be utilized to repay a bridge facility associated with legacy debt.

The prospectus, released after the presentation, includes a provision stating that proceeds from commercial paper or bonds can be used first to repay bridge funding obtained before an issuance. It specifies that such funding must align with the programme's permitted uses, with details to be disclosed in the relevant pricing supplement.

However, the prospectus directs commercial paper proceeds towards cocoa purchases and bond proceeds towards legacy debt, leaving an ambiguity about how using commercial paper proceeds to repay a bridge loan for legacy debt would comply with the prospectus's restriction on bridge funding.

The September 25 issuance announcement further clarified the matter. It identifies the offered instrument as 270-day commercial paper, detailing two uses for the raised funds: financing COCOBOD's cocoa purchases and repaying a bridge facility obtained to refinance its legacy debt.