Accra, March 24, GNA - Government on Wednesday paid GH¢445 million to settle part of Tema Oil Refinery (TOR's) indebtedness to Ghana Commercial Bank (GCB).

Announcing the payment, Minister of Finance and Economic Planning, Dr. Kwabena Duffuor said the huge exposure of GCB to TOR had been a source of concern to government since it weakened the bank.

TOR is GCB's major creditor and as at the end of December 2008, the overdraft position at GCB was approximately GH¢598 million, mainly in the form of established letters of credit, which crystallises into overdraft facilities.

According to the Minister, the debt had since grown to GH¢848 million because of the interest that had accrued on it and with the payment, the balance left was about GH¢403 million.

"This huge exposure of GCB to TOR has been a source of concern to government since it weakened the bank," Dr Duffuor told journalists at a press conference in Accra.

The trend forced government to appoint Ecobank Development Corporation and Ecobank Ghana Limited as Transaction Advisors to ascertain the true state of TOR's debt.

They were to raise 300 million dollars to settle part of TOR's debt and issue bonds to raise another 300 million dollars to restructure TOR's balance sheet, especially its working capital.

Dr. Duffuor said the amount paid would improve GCB's liquidity position and enhance the bank's financial health to meet the primary reserve requirements with Bank of Ghana which had been in violation for a very long time.

He said the stimulus package would also enable GCB to start establishing letters of credit to its clients including government and curtail the issuance of promissory note by government.

"Furthermore, GCB credibility will improve tremendously to enable it compete favourably within the financial system," Dr Duffuor said.

Dr. Duffuor said that the package was a form of recapitalisation to TOR and expressed the hope that their operations and performance would be enhanced.

"What the payment means is that our books are clean and hopefully gives TOR the opportunity to raise LCs to import crude oil to keep our operations going. But in the long-term TOR needs a direct capital injection to effectively undertake its operations," Mr. Kwame Ampofo, Acting Managing Director of TOR said.

Mr. Simon Dornoo, Managing Director of GCB said the payment would impact positively on their operations and enable it to undertake more businesses.