Debt denominated in a foreign currency

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First Atlantic Bank

The bank granted a medium term loan facility of GH¢15,000,000 to the company. The facility is due to expire on August, 2018 and interest rate was 26.47% per annum (subject to review in line with market conditions). The facility is to refinance the company's capital expenditure.

Stanbic Bank Ghana Limited

The Company was granted a Medium Term Loan of USD$5,161,280 by Stanbic Bank Ghana Limited, for general corporate purposes including capital expenditure for new Service Stations and Rebranding exercise. The loan is to be repaid in full over a period of five (5) years with six (6) months moratorium. Interest rate is 6.4% fixed per annum. With respect to security the aggregate of all amounts deemed by the Bank to be outstanding under the facility shall be on an unsecured basis. However, the Bank reserves the right to review the facility from time to time and thereafter call for security should it be considered necessary."

  1. Considering the information above, discuss the risks associated with the dollar-denominated loan and assess additional factors that might influence a company's decision to source debt denominated in a foreign currency?

Reference no: EM132411144

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