Two groups of Ecuador bondholders have proposed revised restructuring terms to the government as it seeks to strike a deal to renegotiate $17.4 billion in debt, Reuters reported. The government’s proposal already has the backing of one group of creditors, holding around half of the bonds and including AllianceBernstein, Ashmore and BlackRock.
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Ecuador reached a preliminary agreement with some of its largest bondholders to restructure $17.4 billion in outstanding debt, Bloomberg News reported. The nation intends to exchange 10 existing bonds maturing between 2022 and 2030 for three new notes due in 2030, 2035, and 2040, reducing the average coupon rate to 5.3 percent, according to a government statement. The plan still needs to be approved by a share of the remaining bondholders.
Investors holding several of Ecuador's sovereign bonds said Thursday that they had formed a committee to conduct talks with the government over a debt restructuring plan as the nation grapples with the COVID-19 pandemic, LatinFinance reported. "The committee is representative of Ecuador's bondholder base and includes holdings across each series of the bonds," the institutional bondholders said in a statement. The committee added that it has hired BroadSpan Capital and UBS as financial advisers in the negotiations.
Ecuador is kicking off the first round of creditor talks this week with the goal of releasing an initial debt restructuring offer as early as late June, according to people with direct knowledge of the matter, Bloomberg News reported. President Lenin Moreno’s administration is pressing to avoid a hard default and to regain access to credit markets. The South American nation plans to convene a call with its biggest bondholders, including a group led by BlackRock Inc.
Investors holding debt protection for Ecuador are in line to share compensation of about $60 million after the South American nation struck a deal with creditors to suspend coupon payments on its foreign debt, Bloomberg News reported. Firms holding the country’s credit-default swaps will receive about 65% of the amount covered by the instruments, according to the final results of an auction to settle the contracts on Tuesday. They get triggered when a borrower fails to pay its debt. Investors use the instruments to make negative bets on borrowers or as hedges for bond investments.
The International Monetary Fund on Saturday confirmed it had approved $643 million in emergency assistance for Ecuador, but said the Andean country would need additional support from other external partners to respond to the coronavirus pandemic, Reuters reported. The outbreak of the novel coronavirus and plummeting oil prices and global demand were having a devastating effect on Ecuador, one of the largest oil exporters in Latin America, said IMF Managing Director Kristalina Georgieva.
As the coronavirus crisis deepens in emerging economies around the world, collapsing currencies, commodity prices, export earnings and tourism revenues threaten to shred the finances of many governments, leaving them scrambling to avoid default, the Financial Times reported. Zambia has already called in advisers to restructure its debt while Ecuador has asked for more time to make coupon payments on three dollar bonds. Few analysts believe they will be the last.
The Covid-19 pandemic pushed Moody’s Investors Service to downgrade Argentina, Ecuador and Zambia deeper into junk territory on Friday, Bloomberg News reported. Moody’s warned of escalating default risks in the three developing nations as global coronavirus cases topped 1 million. The combination of stalled trade, low commodity prices and deteriorating growth has sent emerging-market risk premiums soaring. Bonds from Argentina, Ecuador and Zambia have tumbled amid concern the nations may follow Lebanon’s lead in defaulting.
Ecuador has acknowledged it will fail to make coupon payments on three bonds due later this week but insists it will pay up within the 30-day grace period, as it scrambles for cash amid the Covid-19 outbreak and the crash in oil prices, the Financial Times reported. In an online press conference on Monday night, finance minister Richard Martínez said the government would make a $325m payment due on Tuesday on its 2020 bond, but needed more time to come up with $200m to service bonds due in 2022, 2025 and 2030. Coupon payments had been due this Friday and Saturday.