Ecuador's Correa to offer debt buyback in April

By Alexandra Valencia

QUITO, March 13 (Reuters) - Ecuador's President Rafael Correa said on Friday he will offer investors a foreign bond buyback plan in April, a proposal based on what he considers to be legitimate terms rather than on the value of the debt.

Correa, a left-wing, U.S.-trained economist, has defaulted on the OPEC nation's 2030 and 2012 Global bonds -- with a face value of around $3.2 billion -- after saying the debt was illegally contracted by past governments.

The Ecuadorean leader, who has rattled Wall Street in the past with moves against foreign assets, will likely now offer investors tough negotiations over debt as the global financial crisis batters the Andean country's vital oil income.

"By the middle of April we will have a proposal to buy back those bonds from creditors, but based on what we consider legitimate and not on the nominal value of the bonds," Correa told local radio in an interview.

To assist in its restructuring, Ecuador has hired Lazard Freres, the French consultancy which advised Argentina in its negotiations when it defaulted on around $100 billion in foreign bonds in 2002. Those talks are still going on.

Ecuador declared a default on a payment on its 2030 bonds on Thursday and refused to pay on its 2012 bonds in December. The defaults came after a government-ordered audit said it found irregularities in the debt.

Government officials have said investors can expect a large reduction or "haircut" in the value of their debt, perhaps as big as 60 percent.

The finance ministry said on Thursday the government would not pay a $135 million coupon on its 2030 global bonds that is due on March 15, the end of a 30-day grace period.

Correa, a former finance minister who criticizes "vulture" markets, will run for reelection at the end of April and his often tough stance with Wall Street and foreign investors is widely applauded by his supporters.

One of his popular rallying slogans is "life before debt".

Wall Street generally expected Ecuador to default on the 2030 bonds, which have a face value of $2.7 billion, even after Correa recently admitted the non-payment has hurt banks seeking overseas financing, especially amid the world credit crisis.