Ecuador Seeks “Friendly” Debt Restructuring

Recent remarks made by Ecuador’s finance minister Ricardo Patiño regarding the country’s external debt have been generally welcomed by investors. However, not all are persuaded that the government’s desire for a “friendly” debt restructuring is, in fact, achievable. In a research note, Goldman Sachs said that although the minister’s remarks were “certainly more conciliatory” than previous statements, nevertheless, it “did not see in today’s statements anything that would indicate the government is no longer committed to achieve a significant debt reduction (which would imply a significant haircut on principal)”. Moreover, according to the firm, “the possibility of debt-for-cash repurchases also seems clearly contingent on prices in the secondary market reaching default type levels”.