Ecuador Default-Talk May Force Restructuring

Ecuador's flirtation with a $10.3 billion foreign debt default may force bondholders into restructuring, potentially saving the government billions of dollars at a time when access to capital is increasingly tight, the Associated Press reported today. Ecuador is going to "present a credible threat of default and force bondholders to renegotiate the terms of existing debts, winning savings and considerable benefits for the state," Patrick Esteruelas, an analyst at the Eurasia Group in New York, said Wednesday. "Bondholders are desperate for cash and ready to accept a significant reduction in nominal terms" to salvage their investments, he said. Ecuador delayed $30.6 million in interest payments last week, using a 30-day grace period to assess the results of a 30,000 page audit of its debt contracts, to be made public on Thursday. Government officials have suggested the debt may be "illegitimate," and Finance Minister Maria Elsa Viteri on Tuesday refused to rule out the possibility of a complete default. The move sent Ecuador's benchmark bonds plummeting. Read more.