July 6, 2020 / 7:03 PM / a month ago

UPDATE 2-Ecuador says debt deal would cut capital payments, extend maturities

(Adds bond price movement, background)

QUITO, July 6 (Reuters) - Ecuador’s finance ministry said on Monday that a deal it reached with bondholders to renegotiate the South American country’s debt would cut outstanding capital payments and extend maturities on the country’s bonds.

In a presentation shown to reporters, the cash-strapped country’s government said the deal with institutional holders of its roughly $17.4 billion in outstanding sovereign bonds would include a 5-year grace period on principal payments and a 2-year grace period on all but $79 million of interest payments.

“The negotiation process has been intense,” Finance Minister Richard Martinez told reporters.

Ecuador’s dollar-bonds jumped on the news, with the 2026 issue adding as much as 9 cents on the dollar to trade at 52.5 cents, its highest level since early March, according to data from MarketAxess.

President Lenin Moreno’s government in April reached a deal with the bondholders to delay interest payments through August, as a plunge in oil prices and the coronavirus outbreak weighed on public finances.

Moreno inherited a gaping fiscal deficit and large debt load from his leftist predecessor, Rafael Correa. While he has attempted to implement structural adjustments such as cutting fuel subsidies, major protests have forced him to walk back several proposed austerity measures.

Argentina and Belize are also negotiating debt restructuring plans with creditors.

As part of the Ecuador deal, overall principal payments due would fall to $15.8 billion from $17.4 billion currently, while the average maturity would extend to 12.7 years from 6.1 years currently, according to the ministry, adding that the average interest rate would fall to 5.3% from 9.2% currently.

In an earlier press release, the government said the parties to the deal included fund managers AllianceBernstein, Ashmore Investment Management, Blackrock Financial Management, BlueBay Asset Management and Wellington Management Company, and that discussions were continuing with other bondholder groups.

Martinez said the creditor group that agreed to the deal holds about half the outstanding bonds. (Reporting by Alexandra Valencia in Quito and Karin Strohecker in London; Writing by Luc Cohen; Editing by Chizu Nomiyama and Aurora Ellis)

Nuestros Estándares:Los principios Thomson Reuters
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