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.

Friday, June 19, 2009

Ecuador Buys Back 91% Of Defaulted Debt; Spent $900M

QUITO (Dow Jones)--Ecuadorian Finance Minister Maria Elsa Viteri said Thursday that a total of 91% of bondholders had tendered their Global 2012 or 2030 bonds in a buyback offer.

"We have bought 91% of global 2012 and 2030 bonds; we have retired 91% of the bonds. It is a success," Viteri said Thursday in a public ceremony in Quito.

Viteri added the auction was "a resounding victory for our people."

According to Viteri, $95.37 million of Global 2012 and $194.40 million of Global 2030 remain in the market and the government will attempt to repurchase those bonds.

Viteri said that the government will re-open its offer to bondholders who didn't participate in the auction, but she didn't give details.

At the ceremony, President Rafael Correa said that the government had spent about $900 million on the bond buyback and had repurchased about $2.9 billion worth of the debt.

The president said that servicing the global bonds deprives Ecuador of resources for development.

"We are very close to declaring Ecuador a country free of illegitimate foreign debt," Correa said. "We are analyzing what actions we should take with other segments of the debt, like bilateral and multilateral debt."

Last November, a government-appointed debt audit commission which analyzed Ecuadorian debt contracted between 1976 and 2006 said that most of the debt were "illegitimate" or "illegal."

The commission said that it found irregularities in various segments of the debt, such as double payments, abusive clauses and signs of negligence on the part of high-level government officials.

The commission said multilateral lenders like the Inter-American Development Bank, the World Bank, and the International Monetary Fund, have shifted loans, breaking their rules to use these loans to pay debt and aid creditors.

However, Viteri said that Ecuador maintains its willingness to keep positive and balanced relations with the international financial community and Ecuador could sit down with multilateral lenders to discuss how to deal with "illegal" debt.

According to Viteri, there are several options for multilateral and bilateral debt.

Ecuador had three overseas bond issues outstanding: $510 million in bonds due 2012, which carry a 12% coupon; $650 million of 9.375% bonds due 2015; and $2.7 billion of 10% bonds due 2030.

Correa, a socialist, said the debt had led to a "generalized bankruptcy for Ecuadorians."

"We are dangerous as we could be a bad example for the rest of the indebted nations," Correa said.

He also said that Ecuador has received international financing of about $2.7 billion from November 2008 to April 2009.

Last December, the government refused to pay the interest on its 2012 and 2030 bonds, contending they are "illegal" and "illegitimate, " based on the report of the debt commission.

On April 20, the government launched a modified Dutch auction for its defaulted bonds.

Correa's administration offered a minimum price of 30 cents on the U.S. dollar to repurchase those global bonds, but on May 26 it announced that had set a price of 35 cents on the dollar.

The government has said that it will continue to pay "normally" the Global 2015 bonds.

The Andean country defaulted on its foreign debt obligations in 1999. In August of 2000, it carried out an exchange of Brady bonds and Eurobonds for new 30-year and 12-year bonds, which involved a 40% haircut for creditors.

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