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* Yield at premium to existing Eurobond
* Govt plays down domestic fiscal situation over premium
* Ghana's Eurobond follows other African peers
By Tosin Sulaiman and Kwasi Kpodo
JOHANNESBURG/ACCRA, July 25 (Reuters) - Ghana sold a $750million 10-year Eurobond on Thursday in its second foray intointernational bond markets but paid a premium to investors waryof its fiscal and current account deficits.
The West African producer of cocoa, gold and oil issued thebond at a yield of 8 percent. The order book was $2.2 billion,around three times the issue size, Finance Minister Seth Terkpertold Reuters.
It also bought back $250 million of its outstanding 10-yearissue due in 2017, Terkper said.
Ghana is one of Africa's brightest economic prospects due toits rapid growth rate and stable democracy and has alsoattracted foreign investors to its domestic bond market.
The economy is set to grow by 8 percent this year.
The Eurobond yield stands at a premium to the 2017instrument, currently trading at around 6 percent, suggestinginvestors were unwilling to overlook the fiscal picture.
Ghana is trying to contain a budget deficit that surged to11.8 percent of gross domestic product in 2012, up from 4percent in 2011, partly as a result of public wage increases.
"This (yield) suggests that Ghana offered a decent premiumto compensate investors for the risks associated with thecountry's fiscal and macroeconomic imbalances," said SamirGadio, emerging markets strategist at Standard Bank.
President John Mahama's government, which won electionsDecember, says it aims to reduce the deficit to 9 percent of GDPin 2013 in a country that is the world's second largest producerof cocoa and Africa's biggest gold producer after South Africa.
Terkper and central bank Governor Henry Kofi Wampah playeddown any impact of the macroeconomic picture on the bond yieldand said external factors accounted for any premium.
"We cannot say the coupon rate we paid was based on Ghana'srisks. It's primarily about the unfavourable general conditionsglobally," Wampah told Reuters, adding the coupon was 7.875percent.
The country could have paid around 5 percent had it issuedthe Eurobond before a selloff in emerging market assets thatfollowed comments by Federal Reserve Chairman Ben Bernankeearlier this year, according to one investor. The yield on the2017 bond traded as low as 4.24 percent in April.
"What alarmed us as investors is the fact that the timingwas bad," said the investor, who declined to be named. "Based onour analysis, the opportunity cost loss is at least $100 millionon a net present value basis. That's four district hospitals ifyou want it in social terms."
AFRICAN PEERS
Ghana's main opposition party is challenging the electionresult in a long-running Supreme Court case and blamed thegovernment for the bond premium.
"We need to get our fiscal house back in order. We have toreduce the deficit and get our debt under control," said MarkAssibey-Yeboah, finance spokesman for the New Patriotic Party.
Ghana's Eurobond issue followed on the heels of Africanpeers Zambia, Nigeria and Rwanda who have also tapped investorappetite for high-yielding assets in the past year.
Its debut $750 million 10-year bond launchedin 2007, was four times oversubscribed and was issued at a yieldof 8.5 percent.
Ghana is rated B by Standard and Poor's, B1 by Moodys and B+by Fitch, which revised the country's outlook to negative fromstable after the government announced a surge in its deficit.
"The fiscal situation and the external account are majorsources of concern for us and the deficit management. We don'tsee a turnaround happening this year and it's not clear how itwill be achieved," Edward Al-Hussainy of Moody's ratings agencytold Reuters.
Besides the budget deficit, Ghana's current accountshortfall has also expanded, to $4.92 billion or 12.3 percent ofGDP, from $2.15 billion in 2007.
Public debt increased to 49.4 percent of GDP in 2012, from40.8 percent in 2011, higher than peers such as Nigeria whichhas a debt-to-GDP ratio of 18.6 percent.
The government plans to use the bond's proceeds for capitalexpenditure and refinancing public debt to reduce the cost ofborrowing.
