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Government negotiates payment delay for $17.4 billion debt with bondholders

Finance Minister Richard Martinez reported Monday that a deal has been reached with bondholders to renegotiate Ecuador’s debt and cut outstanding capital payments and extend maturities on the country’s bonds.

Ecuador Finance Minister Richard Martinez

In a presentation shown to reporters, the cash-strapped government said the deal with institutional holders of its roughly $17.4 billion in outstanding sovereign bonds would include a five-year grace period on principal payments and a 2-year grace period on all but $79 million of interest payments.

President Lenin Moreno’s government in April reached a deal with the bondholders to delay interest payments through August, as a plunge in oil prices and the coronavirus outbreak weighed on public finances.

Moreno inherited a gaping fiscal deficit and large debt load following the collapse of international oil prices in 2015. While he has attempted to implement structural adjustments such as cutting fuel subsidies, major protests forced him to walk back several proposed austerity measures.

As part of the deal, overall principal payments due would fall to $15.8 billion from $17.4 billion currently, while the average maturity would extend to 12.7 years from 6.1 years currently, according to the ministry, adding that the average interest rate would fall to 5.3% from 9.2% currently.

In an earlier press release, the government said the parties to the deal included fund managers AllianceBernstein, Ashmore Investment Management, Blackrock Financial Management, BlueBay Asset Management and Wellington Management Company, and that discussions were continuing with other bondholder groups.

8 thoughts on “Government negotiates payment delay for $17.4 billion debt with bondholders

  1. The Bondholders have no choice, and guess what: the financial picture will be even worse 2 years out that it is today. Regardless of shape and form, the underlying debt will be defaulted on.

    1. that story will be reflected in the ratings and trading discounts. sadly, I think you’re right.

      1. They call it “kicking the can down the road”. The holders get to carry the debt on their books, without taking the loss, and Ecuador gets to temporarily avoid it’s 9th default.

      2. All outstanding bonds trade between 39 and 55 cents to the dollar, actually up quite a bit from their lows in March. They are as risky as they have always been but those who bought some of them in March will have doubled their money by now.

  2. Manñana doesn’t mean tomorrow. It just means not today. And mañana there will be another mañana.

  3. As a lover of Ecuador I fear for it’s economic future and the future of its lovely inhabitants.

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