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Under the deal put forward – unchanged from the government’s earlier proposal – 10 existing bonds maturing between 2022 and 2030 would be swapped for three bonds due in 2030, 2035 and 2040, as well as a past due interest bond maturing in 2030.
This would provide debt relief of more than $10 billion over the next four years and $6 billion more between 2025-2030 as well as delivering a nominal haircut of 9%.
“This restructuring, if it is accepted, will provide important relief to the country and will allow more resources to be destined to the management of the sanitary crisis and the reactivation and recovery of the economy,” Ecuador’s finance ministry said in a statement on Monday.
Bondholders will have until July 31 to vote on the deal.
The country’s largest creditor grouping, the Ad Hoc Group including major asset managers such as AllianceBernstein (NYSE:AB), BlackRock (NYSE:BLK) and Ashmore, is backing the plan.
“The members of the Ad Hoc Group believe the successful completion of the transactions contemplated by the Invitation will make a substantial contribution to ensuring the sustainability of Ecuador’s external debt in the medium term,” the group said in a statement on Monday.
The Ad Hoc group collectively holds more than 53% of Ecuador’s total outstanding sovereign bonds and close to or more than 50% of almost every individual bond series.
“We welcome the launch of an offer by Ecuador to restructure its global bonds in a timely and constructive manner,” wrote Gerry Rice, director of the communications department at the International Monetary Fund.
The deal is not done yet, however.
In its latest proposal, the government said it required the support of creditors holding at least 80% of the aggregate principal of all bonds apart from the 2024 issue. The latter, which has different terms, requires 75% support according to legal experts.
“It appears a somewhat risky strategy to us, and it may result in a temporary stall in the process,” said Tiago Severo, Vice President of Latin America Economic Research at Goldman Sachs (NYSE:GS), in an email to Reuters.
“However, we remain of the view that the parties will ultimately find common ground and that a comprehensive restructuring will be achieved in the next few/several weeks.”
Other creditors have tried to push for better terms in recent weeks.
A steering committee including Amundi, Contrarian Capital Management, Grantham Mayo Van Otterloo & Co, and T Rowe Price (NASDAQ:TROW) Associates representing more than 25 institutional investors as well as an ad hoc group of 2024 bond holders urged Quito to sweeten its offer and launched a counter proposal.
They have holdings of more than 25% in certain series of the bonds and more than 35% in others, according to earlier statements. The groups did not immediately respond to request for comment.
