Ecuador Says May Pay Over 30 Cents

Ecuador could pay holders of its defaulted 2012 and 2030 bonds more than the 30-cent floor price in its buyback tender, its finance minister says. “Ecuador has the resources to buy back the 2012 and 2030 bonds and meet a price slightly higher than the minimum,” finance minister Maria Elsa Viteri says, speaking in a 1-way call with investors Tuesday. She adds that such a payment would put great stain on resources, and that the government could have opted for a cheaper means to resolve the issue of the 2 bond series, which a special committee last year deemed illegal. The minister responded to claims that there is no economic justification for the restructuring by saying Ecuador faces significant challenges in the near term stemming from falling oil prices and decreasing remittances. Viteri acknowledges that a group of 2012 holders have accelerated payments, and adds that the republic reserves the right to transfer repurchased bonds to a voting holder – as a means to deal with aggressive holdouts – but has no plans to do so. The price to be established at auction is based on face value only, she says, and payments will not include past due interest. The government is offering 30% of face value for the defaulted 2012s and 2030s in a modified Dutch auction set to close May 15, with results due May 26. Lazard is advising Ecuador. “It is reasonable to assume that the clearing price could be slightly higher than the 30 minimum price with the market prices of 31.5-32.5 an efficient barometer,” says Siobhan Morden, LatAm debt strategist at RBS. “Whether or not the clearing price comes out slightly higher will depend on the participation threshold and whether authorities can maximize participation,” she adds. She notes that the final price could be weighed down by the 1/3-1/2 of the bonds already retired likely being tendered in at the minimum. “There should be high participation from real money investors,” Morden says, as the tender offers an opportunity to exit with a cash