S&P Predicts 0%-30% Ecuador Recovery

S&P has cut Ecuador to SD from CCC minus and predicts scant payback for investors still holding sovereign bonds. “The recovery rating on the global 2012s and global 2030s is 6, indicating the expectation for negligible (0%-10%) recovery in the event of a payment default,” says the agency. “The recovery rating on the global 2015s is 5, indicating the expectation for modest (10%-30%) recovery in the event of a payment default,” it adds. The downgrade follows the government’s decision not to pay $30.6m due on $510m in 2012s, which were chopped to D from C. The $650m in global 2015s fell to C from CC, while $2.7bn in global 2030s were unchanged at C. “We do not expect the government to make the next coupon payment of $135m on February 15, 2009, at which time we would revise the rating to D,” says S&P. The default by Ecuador is its second in less than 10 years and the second by a rated sovereign in 2008. S&P revised Seychelles to SD in August. S&P’s assessment is much more gloomy for investors than Fitch, which sees up to 50% payback from the 2015. It chopped the sovereign to RD from CCC, assigning 11%-30% recovery prospects to the 2012s and 2030s, 31%-50% on the 2015 and 51%-70% on pars and discounts. Fitch sees a bigger loss on the 2012s and 2030s since the government deems them “illegal” and “illegitimate.”