(Adds second investor quotes, background)
By Davide Scigliuzzo
NEW YORK, March 11 (IFR) - Ecuador's determination to keep coupons below 8% is forcing it to target a short maturity as it markets a new bond offering to international investors, according to a source familiar with the situation.
The oil-exporting nation, rated B3/B+/B, hopes to raise at least US$1bn through the sale, which will help plug a widening budget gap caused by falling crude prices.
"They said that in order to stay within their coupon limit they would be willing to sacrifice (something) in terms of maturity," an investor who met with government officials this week told IFR. "I wouldn't be surprised if they come with something between five and seven years."
Some investors, however, would prefer the sovereign to avoid creating too many maturity spikes at the short-end of its bond curve and hence are likely to push for a longer-term bond.
"When I look at their maturity profile, I think it would make sense for them to push this to 10 or 15 year," said a second investor who met with the issuer this week.
"But the government has been very sensitive about the yield they pay and we have seen in the past that they don't want to go over 8%."
Yet with its 7.95% 2024 notes trading at a yield of around 9% on Wednesday, Ecuador might have little choice but to offer a short-dated bond to achieve its pricing goals.
"It wouldn't be a deal breaker, but we would need to look at it a little bit more carefully," said the second investor, referring to the possibility of a five or seven-year bond.
Ecuador placed US$2bn of 2024s last June, marking its first international bond sale since its voluntary default in 2008.
Since being priced at par, the 2024s have traded off to hit a low of 73.00 in mid-December before steadily climbing back to the 92.75 bid price seen on Wednesday.
The sovereign has been working to improve relations with buyside accounts that still look askance at a country that selectively defaulted on certain bonds in 2008.
During recent roadshow meetings, government officials said the country remains open to settle the claims holdout creditors still have on about US$60m of outstanding defaulted debt, the second investor said.
"The government understands that the market perception of the country is relatively negative as a result of the (2008) default and they are seeking to address that," he said.
Ecuador recently hired Citigroup to organize investor meetings in Europe and the United States ahead of the potential issue, which could come to market as soon as next week.
Government officials have already visited accounts in London and Boston and are in Los Angeles today. They will head to San Francisco on Thursday and New York on Friday. (Reporting by Davide Scigliuzzo; Editing by Paul Kilby)