CS Raises Ecuador Debt on Buyback

Credit Suisse recommends moving Ecuador debt to neutral from underweight in its model portfolio, following the announcement of a repurchase offer for its defaulted 2012 and 2030 bonds. “It seems that the recent tender offer for Ecuadorian defaulted bonds was put forward with an eye on multilateral donors. If Ecuador secures sufficient participation in the buyback, this may open a possibility for further multilateral lending,” the shop says in a report. Ecuador has agreed this week to $480m in loans from the Latin American Reserve Fund (FLAR), according to local and wire reports citing economy minister Diego Borja. The sovereign unveiled a proposal this week to repurchase the defaulted bonds through a modified Dutch auction until May 15, setting a floor price of 30% of face value. Foreign holders of the 2012s and 2030s have an unappealing choice, Credit Suisse says, with the experience of Argentine holdouts showing that creditors lack effective options to enforce legal judgment. “Many investors may be resigned to participating in the tender offer and accepting the prices not far from the minimum purchase price,” it says.