LATAM WRAP-Weak oil prices drive Ecuador bonds down even further

jueves 20 de agosto de 2015 17:36 GYT

By Paul Kilby

NEW YORK, Aug 20 (IFR) - Ecuador bond prices fell on Thursday after US crude hit a six-year low on Thursday, exacerbating fears about the oil exporter's ability to pay its debt.

With oil accounting for about 52% of its exports, the Andean nation is particularly vulnerable to the slump in commodities that is pressuring bond prices elsewhere in emerging markets.

Ecuador now faces some tough choices that may impact investors who were persuaded just a year ago to buy the country's first bond issue in nearly a decade from the same government that defaulted in 2008.

Ecuadorian bond prices have essentially moved in line with crude, steadily declining since May. But they took another leg down this week as investors absorbed the tough challenges ahead for the country.

The sovereign's 2020s were trading at 76.50 on Thursday, down from the 77.15 seen at the beginning of the week, while the 2020s have tumbled to 85.30 versus 88.30 seen on Monday.

In a report entitled "This time is worse," Bank of America Merrill Lynch analyst warned that Ecuador faced painful adjustments that may threaten a dollarized economy reliant on oil exports.

"We expect the government to avoid abrupt spending cuts by issuing more debt and tapping assets, rather than defaulting,' the bank said.

Raising funding, however, may prove difficult. The country's financing requirements for 2015 stand at US$10.5bn, or 10% of GDP, with the government having already raised some US$6.3bn as of June, said S&P.   Continuación...