A Tale of Two Sovereigns: Negotiation Attitudes Foretell Differing Fortunes for LatAm Restructurers

Countries do not usually gain friends when telling creditors they can’t pay them back. Yet Ecuador earned serious plaudits as it went about restructuring $17.4bn of bonds this year, GlobalCapital reported. The Ad Hoc Bondholder Group that owned more than half of the sovereign’s bonds even said that the process “set a precedent” for Covid-19 era restructurings. Jan Dehn, head of research at Ashmore, part of the Ad Hoc group, explains that on one hand the group was referring to modifications in collective actions clauses that some creditors hope will become standard practice. Second, says Dehn, “Ecuador had one of the most mature approaches ever to a restructuring…There was a very honest, realistic assessment of the inability to pay owing to the oil price collapse, Covid, and an extraordinary sell-off in external debt.” Read more