Ecuador Rolls Out Buyback Offer

Ecuador has delivered a long awaited proposal to repurchase its defaulted 2012 and 2030 bonds. Its finance ministry has set a floor price of 30% of face value, it says, and will take bids in a modified Dutch auction until May 15 and plans to announce results on or around May 26. The government is not obligated to buy anything, it says, and reserves the right to extend either of those dates as it sees fit. “It is a skillful maneuver – Ecuador is not committing to too many things, it is buying time, and is getting valuable information,” Ramiro Crespo, president of Analytica Securities tells LatinFinance. He adds that the auction gives the sovereign an opportunity to see what holders have, and plot strategy accordingly. There is some $3.2bn outstanding in the 2012 and 2030 bonds, though Ecuador is rumored to have been repurchasing via intermediaries since November. “We think the tender rate will be higher among investors than in the Argentina restructuring and that the participation threshold will also likely be relatively high, given that the government already likely controls the decision of a fair amount of the outstanding claims,” Bulltick says in a report. Argentine participation was slightly above 75%. Bulltick, which had anticipated a swap or much lower price on the buyback, sounded encouraged. “The offer comes better than we had expected,” says the boutique. It was not immediately clear if the government’s proposal raises expectations for legal action on the part of holders. Capital Markets Financial Services is in the process of organizing a committee, according to an official at the Miami-based financial services boutique, declining to give further details. Law firm Milbank Tweed is also organizing holders, following a conference call in March. Milbank attorneys did not return requests for comment regarding their plans.