Funds News

UPDATE 3-Ecuador wins 'unprecedented' investor support for $17.4 bln debt restructuring

(Updates with details on investor backing, finance minister quote)

Aug 3 (Reuters) - Ecuador said on Monday it had won overwhelming investor support for a $17.4 billion foreign debt restructuring, hailing it as an economic turning point following years of economic stagnation and one of the region’s worst coronavirus outbreaks.

President Lenin Moreno’s government in July offered investors the chance to swap 10 existing notes for three new bonds maturing in 2030, 2035 and 2040, in an effort to save billions of dollars in debt service amid a severe cash crunch.

Finance Minister Richard Martinez said the plan won backing from investors holding more than 95 percent of outstanding bonds, despite a last-minute legal challenge by creditors who had called the deal unfair.

“This high percentage of support that we have achieved is unprecedented and shows the confidence in the new path laid out by the president,” Martinez said in a virtual news conference.

The positive result is likely to solidify the Moreno government’s reputation for pragmatic economic policy and willingness to negotiate with creditors.

It also signals that global investors are willing to make concessions amid the pandemic. Images of bodies piling up during the initial months of the coronavirus outbreak in the streets of Ecuador’s largest city, Guayaquil, drew shock around the world.

The deal is expected to improve the government’s cashflow by $10 billion in the coming four years.

The plan won the backing of investors holding all ten outstanding issues. That included bondholders with 95% of the notes maturing in 2024, which had a higher threshold for approval and had been expected to face more resistance.

Ecuador’s largest creditor grouping, the Ad Hoc Group including asset managers such as AllianceBernstein, BlackRock and Ashmore, backed the plan early on.

Two other creditor groups, which include Amundi, Contrarian Capital Management and T Rowe Price Associates, had said the proposal did not go far enough. (Reporting by Alexandra Valencia in Quito and Brian Ellsworth in Caracas Additional reporting by Tom Arnold in London Editing by Paul Simao and Rosalba O’Brien)