Ecuador lures investors with generous premium on tap
By Paul Kilby
NEW YORK, May 14 (IFR) - Republic of Ecuador is tempting investors with a generous premium on its tap of 10.5% 2020 bonds.
In its second international bond issuance this year, Ecuador is offering the 2020 bonds on Thursday with initial thoughts of high 8%, or a 50bp-75bp premium over 8.00%-8.10% yield on the bonds in the secondary markets a day before.
Ecuador's move to leave some value on the table is expected to win over investors reluctant to increase exposure to a country still run by a government that selectively defaulted on its bonds just seven years ago.
"Unless (President) Correa leaves, I don't like Ecuador, but I am looking at this as it has a decent concession," said a US based investor.
The tap also comes on the back of a rally in the 2020s alongside a recovery in crude prices. On Wednesday the 2020s were being bid at 109.75, marking a considerable jump from late March when they priced at par to yield 10.50%.
Post the rally, the country would be achieving considerably tighter pricing even in the high 8s, said bankers, who also thought they should have reached further up the yield curve.
"The bond has rallied significantly but I don't know why they are doing a five year when they could do a 10-year at a better rate," said a senior DCM banker.
The sovereign's 7.95% 2024s were trading Wednesday at around 99.75 bid or 8% on a yield basis. Continuación...