The Wall Street Journal 11/03/2015
Pressured by falling oil prices and a strengthening U.S. dollar, Ecuador expects to tap international capital markets again as soon as next week by selling sovereign bonds to deal with financing challenges.
The country, whose debt is rated B3 by Moody’s Investors Service, is hosting a series of investor meetings in London, Boston, Los Angeles, San Francisco and New York.
“Finance Minister Fausto Herrera is leading the meetings with foreign investors that started on Monday,” Victor Carvajal, a ministry spokesman, said on Tuesday. He declined to provide further details.
The possibility of the country tapping global investors again for funding has been flagged by the government since last year and was reflected in the country’s 2015 budget.
The transaction, according to people familiar with the matter, could provide up to $2 billion to the Andean country, but economists expect high financing costs for any new debt issue.
Former finance minister Fausto Ortiz said Ecuador could place the bonds probably at a rate of about 9%.
In June 2014, Ecuador sold $2 billion of 10-year bonds yielding 7.95%, returning to international capital markets for the first time since 2008, when it defaulted on $3.2 billion in global bonds, a debt burden that President Rafael Correa at the time called illegal and illegitimate.
“Currently it is difficult to think of achieving an attractive rate. It is clear that the recovery in oil prices will take time and the government is looking for fresh money to meet its financial needs for this year and to avoid higher pressures and arrears next year,” says Juan Rivadeneira, an economist with private consulting firm Profitas.
The Correa administration has said it expects financing needs to total about $10 billion in 2015, but Mr. Ortiz said taking into account the drop in oil prices, the country more likely will require about $14 billion.
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