The people of Ecuador are rising up to refound their country as a pluri-national homeland for all. This inspiring movement, with Ecuador's indigenous peoples at its heart, is part of the revolution spreading across the Americas, laying the groundwork for a new, fairer, world. Ecuador Rising aims to bring news and analysis of events unfolding in Ecuador to english speakers.

Saturday, June 02, 2007

Citi to release client names in Ecuador bond case

Citi has agreed to fully assist Ecuadorean authorities in their investigations over alleged insider trading in the country’s outstanding sovereign bonds, in one of the first cases of its kind in South America.

The US bank said yesterday it planned to co-operate with the “appropriate legal authorities” after Ecuadorean prosecutor Jorge German called on it to release the names of the investors that hold and receive coupon payments on Ecuador’s global bonds due 2030.

The demand was made as part of an investigation into allegations of trading irregularities in the bonds and credit default swaps ahead of a $135m (€100m) coupon payment to investors earlier this year.

Citi, which is in charge of transacting the government’s payment to the bondholders, is expected to disclose the names of the investors as part of the probe.

The investigation was provoked by the emergence of a video clip in February purportedly showing economy minister Ricardo Patiño conspiring with investors to play the market.

Patiño appears in the clip to suggest that he could frighten the market, allowing the investors to make a profit.

The recording was made at the height of the controversy in mid-February, after Ecuador’s new government under president Rafael Correa talked of a possible default on the $135m interest payment on its 2030 bonds.

The bonds traded at a low of 68.2 cents in the dollar on January 24 as investors feared a default.

As such, investors would then buy protection through credit default swaps against Ecuadorean bonds, making a profit when the government in fact met interest payments.

The bonds traded up after the February coupon payment was made, and in recent weeks traders have said they are trading around 90 cents in the dollar.

The debacle, which has caused greater volatility in the Ecuadorean bond market, highlights the level of risk associated with the bonds from emerging market countries.

It emerged earlier this week that an executive in the Shanghai office of BNP Paribas bribed a senior government official in the capital in order to win business underwriting Chinese sovereign bonds, according to the Beijing city prosecutor’s office.

Liu Min, then the head of the French bank’s fixed income department, allegedly paid $128,000 to Xu Fangming, a Ministry of Finance official, in the late 1990s to ensure he did not object to BNP Paribas' underwriting mandate.

BNP Paribas has said it has “a zero tolerance policy toward any unethical practices and would never use bribes to obtain business".

No comments:

Post a Comment