By Joan Magee Ecuador is gunning for a sub 7% yield on a new 10-year bond, or even mid 6s, should sufficient demand exist at that level, say investors who have met with the sovereign during roadshows over the last week.
The country has been making its way back into the good graces of the international debt capital markets after selectively defaulting in 2008 on US$3.2bn of debt. Ecuador has been buying back defaulted paper via Lazard in an effort to put any litigation risk behind it and avoid an Argentina-style standoff with holdouts.
After the default, the sovereign bought back 91% of two bonds maturing in 2012 and 2030 at 35% of face value, leaving about US$288m outstanding. Since then, it has reduced that amount to just under US$140m, said a source close to the sovereign.
“We have now bought back nearly all of the outstanding debt from 2008,” Nathalie Cely, Ecuador ambassador to the US, told IFR. “Ecuador’s re-entry into the bond market is under consideration, along with other means of financing.”
The country’s 2015 bonds have traded up almost three points over the last week and were being quoted at 107.25-108.34 or 4.68% to 3.77% on a yield basis.
Earlier this month, President Rafael Correa had said the country was targeting a US$700m size, but some in the market see the size edging up to US$1bn or even US$1.5bn if demand is sufficiently strong.
The country has hired Citigroup and Credit Suisse to arrange meetings with investors. (Joan.Magee@thomsonreuters.com) (Reporting by Joan Magee; Editing by Paul Kilby and Marc Carnegie)