27 de septiembre de 2016 / 21:32 / en un año

Ecuador returns to market after short hiatus

NEW YORK, Sept 27 (IFR) - Ecuador priced its second bond in a matter of months on Tuesday, seizing its chance to raise US$1bn from investors still willing to add exposure to weaker EM names.

The oil exporting nation had to pay up to get the deal done. It priced the US$1bn tap of 10.75% 2022s at par or several points inside where the outstanding 2022s were trading, on books of about US$2bn.

“Initial price talk was almost three points lower to where the bonds closed on Monday,” said Sean Newman, a senior portfolio manager at Invesco.

This deal, along with the US$1bn raised in late July through the first issue of the 2022s, essentially covers the country’s 2016 external funding needs of around US$1.5bn-US$2bn, according to Newman.

That is good news for a government that still faces a deteriorating economic outlook and narrowing financing options.

Indeed, Ecuador’s ability to lure interest among international investors underscores the ongoing bid for EM assets.

“This is yet another indication that the weakest credit can still issue,” said Sarah Glendon, head of sovereign research at hedge fund Gramercy.

“Spreads are so tight relative to fundamentals and that story is disconcerting, so we are cautious about the credits we choose to invest in.”

Hit by lower oil prices and an earthquake that caused billions of dollars worth of damages, the country’s dollarized economy is expected to shrink 1.7% this year, according to the Central Bank.

The left wing government of President Rafael Correa has also been reluctant to seek help from the International Monetary Fund, preferring instead to tap the bond market.

However, any new government following elections early next year may have little choice but to accept IMF conditions in an effort to cover funding gaps.

That at least is what some investors have been hoping.

“It is a deteriorating fundamental story,” said Glendon. “I don’t expect that to change overnight. However some positives may include a change of government and an IMF program.” (Reporting By Paul Kilby; Editing by Shankar Ramakrishnan)

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