Tuesday, 13 January 2009

Ecuador, Mr. Correa and The Bonds (Update)

Ecuadorean Finance Minister Maria Viteri is likely to announce this week (exactly on Jan. 14) a draft proposal to renegotiate payments on the defaulted Global 2012 and 2030 bonds (Am I being too optimistic? We have to give these people the benefit of the doubt, I guess.) But remember, dear reader, dear bondholder: If you are an owner of the 2015 bond, be sure something may happen to the coupon payment you are entitled to on Jan. 15 (you have already waited 30 days for it ...)

One source in Quito told us that the proposal may hint a bond buyback at ridiculously low prices (President Rafael Correa, photo, always praised the Argentine renegotiation of debt in arrears -- a process that only bandits could have carried out in such a smooth way,) and may include important changes in covenants and terms for the remaining bonds. Goldman Sachs wrote this morning that a debt swap might be possible because the government is falling into a financial bind as oil prices decline.

For the time being, the Ecuadoreans ''can count on multilateral loans, domestic savings, and the financial support of friendly countries´´ as sources of dollars, Goldman Sachs says. As the shop suggests, Correa and his cronies have the ball on their side, for the moment.

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