By Alexandra Valencia and Brian Ellsworth
QUITO, Aug 3 (Reuters) – Ecuador said on Monday that it won strong investor support for the restructuring of some $ 17.4 billion in sovereign bonds, a victory for the South American nation facing liquidity problems from the coronavirus pandemic and low oil prices.
President Lenín Moreno raised in July his formal proposal to exchange about 10 outstanding papers for three new bonds maturing in 2030, 2035 and 2040 under new economic conditions, in an effort to save billions of dollars in debt service.
Economy Minister Richard Martinez said the country had won the backing of 95.42% of bondholders maturing in 2024, who needed a higher voting threshold and expected more resistance after a lawsuit raised by two investment firms against the country arguing unfair treatment.
While the other nine series of papers reached an aggregate vote of 98.15%, according to the minister.
“This high percentage of support that we have achieved as a country is unprecedented, which demonstrates confidence in the new course charted by the President of the Republic,” added Martinez, in a virtual press conference.
Ecuador faces hard effects on its economy due to the coronavirus pandemic. Images of bodies in houses and streets during the first months of the outbreak in Guayaquil, the country’s largest city, caused a stir worldwide.
The government has yet to resolve a large fiscal deficit and liquidity problems that are affecting the payment of public sector employee wages and debts to local suppliers.
“It is great news, but it cannot create a mirage, that is, the fiscal situation is there, still latent and we will be solving it as the months go by,” Martínez said.
The date for the formal bond exchange is scheduled for August 12, but the ministry said it could be extended no later than August 20.
But, the Government granted a new term until August 7 for those holders who did not vote on Monday and want to join the exchange of their papers. “This opportunity offered by the Republic will allow holders who have not given their consent to obtain more liquid instruments,” the Economy Ministry explained earlier in a statement.
Moreno said in a televised speech that the high support in the vote shows “the confidence and credibility” that the country has recovered and that the resources that will be released with the agreement will be for social protection, economic reactivation and sustaining dollarization.
The government has said that the new conditions of the bonds will mean a relief of some 16,000 million dollars in the next 10 years.
Ecuador’s debt restructuring proposal includes a reduction of some $ 1.54 billion in debt capital, an extension of the maturity of the papers and lower interest rates, as well as a 5-year grace period for the capital. and about two for interest.
Ecuador is also negotiating an agreement for its significant bilateral debt with China and another with the International Monetary Fund.
(Report by Alexandra Valencia. Edited by Javier Leira, Juana Casas and Manuel Farías)